UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549


FORM
      10-K





(Mark
      One)


x Annual
      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934


For
      the
      fiscal year ended September 30, 2008 or


 ̈ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
      Act
      of 1934


For
      the
      transition period from _________ to _________





Commission
      file number 0-6508





**IEC
      ELECTRONICS CORP.**


(Exact
      name of registrant as specified in its charter)





Delaware
            13-3458955(State
                or other jurisdiction of
            (IRS
                Employer ID No.)incorporation
                or organization)





105
      Norton Street, Newark, New York 14513


(Address
      of principal executive offices, including zip code)





Registrant's
      telephone number, including area code: 315-331-7742





Securities
      registered pursuant to Section 12(b) of the Act: None





Securities
      registered pursuant to Section 12(g) of the Act:





Common
      Stock, $.01 par value


(Title
      of
      Class)





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.  Yes  ̈  No x




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.   Yes  ̈  No x




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports) and (2) has been subject to such filing requirements
      for
      the past 90 days.   Yes x  No  ̈




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K  ̈ .




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer”, “accelerated filer”, and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act (Check one)





 ̈Large accelerated filer
             ̈Accelerated filerxNon-accelerated filer
             ̈Smaller reporting company




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).    Yes  ̈ No x




At
      March
      28, 2008, the last business day of the registrant’s most recently completed
      second fiscal quarter, the aggregate market value of the shares of common stock
      held by non-affiliates for the registrant was $13,605,851 (based on the closing
      price of the registrant’s common stock on the Over-the-Counter Bulletin Board on
      such date). Shares of common stock held by each executive officer and director
      and by each person and entity who beneficially owns more than 10% of the
      outstanding common stock have been excluded in that such person or entity under
      certain circumstances may be deemed to be an affiliate. Such exclusion should
      not be deemed a determination or admission by registrant that such individuals
      or entities are, in fact, affiliates of the registrant.




As
      of
      November 06, 2008, there were outstanding 9,336,292 shares of Common
      Stock.




Documents
      incorporated by reference:




Portions
      of IEC Electronics Corp.'s Proxy Statement for the 2009 Annual Meeting of
      Stockholders are incorporated into Part III of this Form 10-K.









**TABLE
      OF CONTENTS**




PAGE**PART
                I**Item
                1:
            Business
            3Item
                1A:
            Risk
                Factors
            6Item
                1B:
            Unresolved
                Staff Comments
            10Item
                2:
            Properties
            10Item
                3:
            Legal
                Proceedings
            10Item
                4:
            Submission
                of Matters to a Vote of Security Holders
            10Executive
                Officers of Registrant
            11**PART
                II**Item
                5:
            Market
                for Registrant's Common Equity, Related StockholderMatters,
                and Issuer Purchases of Equity Securities
            12Item
                6:
            Selected
                Consolidated Financial Data
            13Item
                7:
            Management's
                Discussion and Analysis of FinancialCondition
                and Results of Operations
            14Item
                7A:
            Quantitative
                and Qualitative Disclosures about Market Risk
            18Item
                8:
            Financial
                Statements and Supplementary Data
            18Item
                9:
            Changes
                in and Disagreements with Accountantson
                Accounting and Financial Disclosure
            19Item
                9A(T):
            Controls
                and Procedures
            19Item
                9B:
            Other
                Information
            20**PART
                III**Item
                10:
            Directors,
                Executive Officers, and Corporate Governance
            20Item
                11:
            Executive
                Compensation
            20Item
                12:
            Security
                Ownership of Certain Beneficial Owners andManagement
                and Related Stockholder Matters
            20Item
                13:
            Certain
                Relationships, Related Transactions andDirector
                Independence
            20Item
                14:
            Principal
                Accountant Fees and Services
            20**PART
                IV**Item
                15:
            Exhibits
                and Financial Statement Schedules
            21





"SAFE
      HARBOR" CAUTIONARY STATEMENT UNDER THE


PRIVATE
      SECURITIES LITIGATION REFORM ACT OF 1995





References
      in this report to “IEC”, the “Company”, “we”, “our”, or “us” mean IEC
      Electronics Corp. and its subsidiaries, except where the context otherwise
      requires. This Annual Report on Form 10-K contains certain statements that
      are,
      or may be deemed to be, forward-looking statements within the meaning of
      section-27A of the Securities Act of 1933 and section-21E of the Securities
      Exchange Act of 1934, and are made in reliance upon the protections provided
      by
      such Acts for forward-looking statements. These forward-looking statements
      (such
      as when we describe what we “believe”, “expect” or “anticipate” will occur, and
      other similar statements) include, but are not limited to, statements regarding
      future sales and operating results, future prospects, the capabilities and
      capacities of business operations, any financial or other guidance and all
      statements that are not based on historical fact, but rather reflect our current
      expectations concerning future results and events. The ultimate correctness
      of
      these forward-looking statements is dependent upon a number of known and unknown
      risks and events, and is subject to various uncertainties and other factors
      that
      may cause our actual results, performance or achievements to be different from
      any future results, performance or achievements expressed or implied by these
      statements. The following important factors, among others, could affect future
      results and events, causing those results and events to differ materially from
      those expressed or implied in our forward-looking statements: business
      conditions and growth in our customer's industries, the electronic manufacturing
      services industry and the general economy, variability of operating results,
      our
      dependence on a limited number of major customers, the potential consolidation
      of our customer base, availability of components, dependence on certain
      industries, variability of customer requirements, our ability to assimilate
      acquired businesses and to achieve the anticipated benefits of such
      acquisitions, other economic, business and competitive factors affecting our
      customers, our industry and business generally and other factors that we may
      not
      have currently identified or quantified. For a further list and description
      of
      various risks, relevant factors and uncertainties that could cause future
      results or events to differ materially from those expressed or implied in our
      forward-looking statements, see the "Risk Factors” and "Management's Discussion
      and Analysis of Financial Condition and Results of Operations" sections
      elsewhere in this document. All forward-looking statements included in this
      Report on Form-10-K are made only as of the date of this Report on Form-10-K,
      and we do not undertake any obligation to publicly update or correct any
      forward-looking statements to reflect events or circumstances that subsequently
      occur or which we hereafter become aware of. You should read this document
      and
      the documents that we incorporate by reference into this Annual Report on
      Form-10-K completely and with the understanding that our actual future results
      may be materially different from what we expect. We may not update these
      forward-looking statements, even if our situation changes in the future. All
      forward-looking statements attributable to us are expressly qualified by these
      cautionary statements.




2





**PART
      I**




ITEM
      1.
      BUSINESS





Overview





IEC
      Electronics Corp.,("IEC", "we", "our", “us” the “Company”), is a premier
      provider of electronic manufacturing services,(“EMS”), to advanced technology
      companies. We specialize in the custom manufacture of high reliability, complex
      circuit cards, system level assemblies and a wide array of custom cable/wire
      harness assemblies. We excel where quality is paramount and where low to medium
      volume, high mix production is the norm. We utilize state-of-the art, automated
      manufacturing and reliability testing equipment and have created a “high
      intensity response culture” to react to our customer’s ever-changing needs. As a
      true extension of our customer’s operation, we have applied industry leading Six
      Sigma and Lean Manufacturing principles to eliminate waste and lower our
      customer’s total cost of ownership. While many EMS services are viewed as a
      commodity, we have truly set ourselves apart through an uncommon mix of unique
      features including...




·
            A
                world class Technology Center that combines a dedicated prototype
                manufacturing center with an on-site Materials Analysis Lab (headed
                by a
                staff PhD) for the seamless introduction of complex electronics




·
            A
                sophisticated Lean/Sigma continuous improvement program supported
                by four
                certified Six Sigma Blackbelts delivering best-in-class
                results




·
            Industry-leading
                Web Portal providing real-time access to a wide array of critical
                customer
                data




·
            In-house
                custom functional test development to support complex system-level
                assembly, test, troubleshoot and end-order fulfillment




IEC
      Electronics Corp., a Delaware corporation, is the successor by merger in 1990
      to
      IEC Electronics Corp., a New York corporation, which was organized in 1966.
      On
      May 30, 2008, IEC acquired all of the stock of Val-U-Tech Corp., a wire and
      cable harness interconnect business, located in Victor, New York. Val-U-Tech
      is
      a premier cable and wire harness manufacturer specializing in high-reliability
      applications for companies in the military, medical, industrial and
      transportation market sectors. Val-U-Tech manufactures a diverse portfolio
      of
      custom cable/wire harness assemblies, mechanical sub-assemblies, circuit card
      assemblies and box builds with an emphasis on perfect quality delivered
      precisely on time.





IEC
      is a
      world-class ISO 9001-2000 and AS9100 certified company. The AS9100 standard
      certification enables IEC to service the military and commercial aerospace
      markets. We are ITAR registered and NSA approved under the COMSEC standard.
      Our
      manufacturing processes encompass the best aspects of Lean Manufacturing and
      Six
      Sigma Principles. Many customers consider these certifications crucial when
      qualifying an EMS provider. Our state-of-the-art Technology Center includes
      pilot build, prototype assembly, design engineering services, and an Advanced
      Materials Technology Laboratory.





We
      continually evaluate emerging technology and maintain a technology road map
      to
      ensure relevant processes are available to our customers when commercial and
      design factors so indicate. The current generation of interconnection
      technologies includes chip scale packaging and ball grid array (BGA) assembly
      techniques. We have placed millions of plastic and ceramic BGA's since 1994.
      Future advances will be directed by our Technology Center, which combines
      Prototype and Pilot Build Services with the capabilities of our Advanced
      Materials Technology Laboratory, and is supported by our Design Engineering
      Group.





Our
      experienced workforce has a high level of technical expertise. Our emphasis
      is
      on building the most challenging complete systems serving original equipment
      manufacturers with advanced electronics technology. IEC has positioned itself
      as
      a leader of lead-free solder assembly technology through early development
      and
      technical publications. Lead-free was mandated by July 2006 for many electronic
      products sold in Europe.





Our
      executive offices are located at 105 Norton Street, Newark, New York 14513.
      Our
      telephone number is (315)331-7742, and our Internet address is www.iec-electronics.com .




3




Electronics
      Manufacturing Services: The Industry




The
      EMS
      industry specializes in providing program management, technical support and
      manufacturing expertise required to take a product from the early design and
      prototype stages through volume production and distribution. Primarily as a
      response to rapid technological change and increased competition in the
      electronics industry, OEMs have recognized that by utilizing EMS providers
      they
      can improve their competitive position, realize an improved return on investment
      and concentrate on their core competencies such as research, product design
      and
      development and marketing. In addition, EMS providers allow OEMs to bring new
      products to market rapidly and adjust more quickly to fluctuations in product
      demand; avoid additional investment in plant, equipment and personnel; reduce
      inventory and other overhead costs; and establish known unit costs over the
      life
      of a contract. Many OEMs now consider EMS providers an integral part of their
      business and manufacturing strategy.




OEMs
      increasingly require EMS providers to provide complete turnkey manufacturing
      and
      material handling services, rather than working on a consignment basis in which
      the OEM supplies all materials and the EMS provider supplies labor. Turnkey
      contracts involve design, manufacturing and engineering support, the procurement
      of all materials, and sophisticated in-circuit and functional testing and
      distribution.





IEC's
      Strategy





Our
      strategy is to cultivate strong manufacturing partnerships with established
      and
      emerging OEMs in the electronics, military and aerospace industries that require
      high reliability final assemblies. These long-term business partnerships involve
      the joint development of manufacturing and support strategies with OEM customers
      and promote customer satisfaction. In implementing this strategy, we offer
      our
      customers a full range of manufacturing solutions through flexibility in
      production, high quality and fast-turnaround manufacturing services and
      computer-aided testing.




We
      generally enter into formal agreements with our significant customers. These
      agreements generally provide for fixed prices for one year, absent any customer
      changes which impact cost of labor or material, and rolling forecasts of
      customer requirements. After establishing an OEM relationship, we offer our
      consultation services with respect to the manufacturability and testability
      of
      the product design. We often recommend design changes to reduce manufacturing
      costs and to improve the quality of the finished assemblies.





Products
      and Services





We
      manufacture a wide range of assemblies, which are incorporated into many
      different products. We provide electronic manufacturing services primarily
      for
      wireless communication systems, test diagnostic equipment, military and defense
      systems, transportation products, and medical instrumentation. During the fiscal
      year ended September 30, 2008 we provided electronics and cable harness
      manufacturing services to approximately 52 different customers. We provide
      our
      services to multiple divisions and product lines of many of our customers and
      typically manufacture successive product generations for our customers. In
      some
      cases, we are the sole contract manufacturer for the customer site or division,
      providing all services, prototype through box build and functional
      test.





Materials
      Management





We
      generally procure material only to meet specific contract requirements. In
      addition, our agreements with our significant customers generally provide for
      cancellation charges equal to the costs, which are incurred by us as a result
      of
      a customer's cancellation of contracted quantities. Our internal systems provide
      effective controls for all materials, whether purchased by us or provided by
      the
      customer, through all stages of the manufacturing process, from receiving to
      final shipment.





Availability
      of Components





Substantially
      all of our net sales are derived from turnkey manufacturing in which we provide
      both materials procurement and assembly services. We are well positioned with
      supplier relationships and material procurement expertise to acquire needed
      materials. However, availability of customer-consigned parts and unforeseen
      shortages of components on the world market are beyond our control and could
      adversely affect revenue levels and operating efficiencies.





Suppliers





We
      operate in a strategic partnership arrangement with our key distribution
      suppliers. These strategic partnerships and associated automated trading
      methodologies provide benefits such as better payment terms, consignment or
      bonded inventories, reduced procurement lead-time, competitive pricing, reduced
      quotation processing, some protection during periods of supply allocation and
      opens access to global resources. We also have preferred supplier partnership
      agreements in place for custom commodities such as printed circuit boards and
      metals.




4


Marketing
      and Sales





Our
      sales
      increased during 2008, primarily due to the addition of several new customers,
      and increased market share with existing customers. These customers, along
      with
      the customers we anticipate adding, are expected to generate further revenue
      growth during 2009. We utilize a direct sales force as well as a nationwide
      network of Manufacturers Representatives. Through this hybrid sales approach,
      we
      execute a focused sales strategy targeting only those customers with product
      profiles aligned with our core areas of expertise. For example, we focus on
      customers developing complex, advanced technology products for a wide array
      of
      market sectors ranging from satellite communications, medical, military and
      general industrial.




Typically,
      the demand profiles associated with these customers are high reliability and
      are
      in the low to moderate volume range with high variability of quantity and mix
      requirements for end item configurations. In fact, these products often
      represent emerging technologies requiring high intensity of manufacturing
      support to seamlessly transfer them from the early product development stage
      through prototyping onto volume manufacturing. As these products exit the
      product development phase, specialized capabilities are required to support
      rapid response prototyping requirements in a dynamic engineering change
      environment. As a result, the usual industry outsourcing models associated
      with
      these customers rarely include supply alternatives in low cost labor regions
      such as Asia and Mexico.




Our
      sales
      efforts are driven by focused marketing and sales activities in targeted areas
      supported by customer presentations. Sales leads resulting from these marketing
      activities are assigned to a representative covering a customer's location
      for
      qualification and further development. Referrals by existing customers continue
      to be one of our sources of new opportunities.





Backlog





Our
      backlog as of September 30, 2008 and 2007 was approximately $40.5 million and
      $22.3 million, respectively. We had additional forecasted orders as of September
      30, 2008 and 2007 of $3.4 million and $5.3 million respectively. Forecasted
      orders are not firm orders, but our customers have made commitments to
      compensate us for any unused inventory that we procure in anticipation of these
      orders. Backlog consists of contracts or purchase orders with delivery dates
      scheduled within the next 12 months. Substantially the entire current backlog
      is
      expected to be shipped within our current fiscal year. Variations in the
      magnitude and duration of contracts received by us, and customer delivery
      requirements may result in fluctuations in backlog from period to
      period.





Governmental
      Regulation





Our
      operations are subject to certain federal, state and local regulatory
      requirements relating to environmental, waste management, health and safety
      matters. Management believes that our business is operated in compliance with
      all applicable regulations promulgated by the Occupational Safety and Health
      Administration and the Environmental Protection Agency and corresponding state
      agencies, which respectively, pertain to health and safety in the work place
      and
      the use, discharge, and storage of chemicals employed in the manufacturing
      process. Current costs of compliance are not material to us. However, new or
      modified requirements, not presently anticipated, could be adopted creating
      additional expense for us.





Employees





IEC's
      employees numbered 350 at September 30, 2008, including 292 employees engaged
      in
      manufacturing, 28 in engineering, and 22 in administrative and marketing
      functions. None of our employees are covered by a collective bargaining
      agreement. We have not experienced any work stoppages and believe that our
      employee relations are good. We have access to a large work force by virtue
      of
      our northeast location midway between Rochester and Syracuse, two upstate New
      York industrial cities.





Patents
      and Trademarks





We
      hold
      patents unrelated to electronics manufacturing services and also employ various
      registered trademarks. We do not believe that either patent or trademark
      protection is material to the operation of our business.





5




ITEM
      1A.
      RISK FACTORS





**OUR
      OPERATING RESULTS MAY FLUCTUATE DUE TO A NUMBER OF FACTORS, MANY OF WHICH ARE
      BEYOND OUR CONTROL.**





Our
      annual and quarterly results may vary significantly depending on factors,
      including:





-
            adverse
                changes in general economic conditions-
            the
                level and timing of customer orders and the accuracy of their
                forecasts-
            the
                level of capacity utilization of our manufacturing facility and associated
                fixed costs-
            price
                competition-
            market
                acceptance of our customers products-
            business
                conditions in our customers’ end markets-
            our
                level of experience in manufacturing a particular
                product-
            change
                in the sales mix of our customers-
            the
                efficiencies achieved in managing inventories and fixed
                assets-
            fluctuations
                in materials costs and availability of materials-
            the
                timing of expenditures in anticipation of future orders-
            changes
                in cost and availability of labor and components-
            our
                effectiveness in managing manufacturing
                process.




The
      EMS
      industry is impacted by the state of the U.S. and global economies, which are
      both impacted by world events. An economic slowdown, in particular in the
      industries served by us, may result in our customers reducing their forecasts.
      The demand for our services could weaken, which in turn could substantially
      influence our sales, capacity utilization, margins and financial results.
      Historically, we have seen periods, such as in fiscal 2003 and 2002, when EMS
      industry sales were adversely affected by a slowdown in wireless/networking
      and
      wireless infrastructure sectors as a result of reduced end-market demand and
      reduced availability of capital to fund existing and emerging technologies.





**WE
      DEPEND ON A RELATIVELY SMALL NUMBER OF CUSTOMERS, AND IF WE LOSE ANY OF THESE
      CUSTOMERS OUR SALES AND OPERATING RESULTS COULD DECLINE SIGNIFICANTLY.**





A
      small
      number of customers are responsible for a significant portion of our net sales.
      During fiscal 2008, 2007, and 2006, our five largest customers accounted for
      62%, 61%, and 66% of net sales, respectively. The percentage of IEC's sales
      to
      its major customers may fluctuate from period to period. Our principal customers
      have varied from period to period, and our principal customers may not continue
      to purchase services from us at the current levels, or at all.





**WE
      DEPEND ON THE ELECTRONICS INDUSTRY, WHICH CONTINUALLY PRODUCES TECHNOLOGICALLY
      ADVANCED PRODUCTS WITH SHORT LIFE CYCLES.**





Factors
      affecting the electronics industry in general could seriously harm our customers
      and, as a result, us. These factors include:





-
            the
                inability of our customers to adapt to rapidly changing technology
                and
                evolving industry standards, which result in short product life
                cycles;-
            the
                inability of our customers to develop and market their products,
                some of
                which are new and untested;-
            the
                potential that our customers' products may become obsolete or the
                failure
                of our customers' products to gain widespread commercial acceptance;
                and-
            recessionary
                periods in our customers' markets.




6


**OUR
      RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY
      GLOBAL ECONOMIC AND FINANCIAL MARKETS CONDITIONS.**





Current
      global economic and financial markets conditions, including severe disruptions
      in the credit markets and the potential for a significant and prolonged global
      economic recession, may materially and adversely affect our results of
      operations and financial condition. These conditions may also materially impact
      our customers and suppliers. Economic and financial market conditions that
      adversely affect our customers may cause them to terminate existing purchase
      orders or to reduce the volume of products they purchase from us in the future.
      We may have significant balances owing from customers that operate in cyclical
      industries and under leveraged conditions that may impair the collectability
      of
      those receivables. Failure to collect a significant portion of those receivables
      could have a material adverse effect on our results of operations and financial
      condition. Adverse economic and financial credit terms our suppliers extend
      to
      us, such as shortening the required payment period for outstanding accounts
      receivable or reducing the maximum amount of trade credit available to us.
      Changes of this type could significantly affect our liquidity and could have
      a
      material adverse effect on our results of operations and financial condition.
      If
      we are unable to successfully anticipate changing economic and financial markets
      conditions, we may be unable to effectively plan for and respond to those
      changes, and our business could be negatively affected.





**FALILURE
      TO MANAGE GROWTH AND CONTRACTION, IF ANY, MAY SERIOUSLY HARM OUR
      BUSINESS**





In
      late
      2006 and early 2007 we expanded our operations and added many new employees.
      These actions resulted in additional costs and start-up inefficiencies. If
      we
      are unable to effectively manage the currently anticipated growth or if the
      anticipated net sales are not realized, our operating results could be adversely
      affected.





**ENERGY
      PRICE INCREASES MAY NEGATIVELY IMPACT OUR RESULTS OF
      OPERATIONS**





Certain
      of the components used in our manufacturing activities are petroleum-based.
      In
      addition, we, along with our suppliers and customers, rely on various energy
      sources (including oil) in our transportation activities. Over the past several
      years, energy prices have sharply increased and have experienced significant
      volatility. These increased energy prices have resulted in an increase to our
      raw material costs and transportation costs. In addition, the transportation
      costs of certain of our suppliers and customers have increased, and some of
      these increased costs may be passed along to us. We may not be able to increase
      our product prices enough to offset these increased costs. In addition, any
      increase in our product prices may reduce our future customer orders and
      profitability.





**START-UP
      COSTS AND INEFFICIENCIES RELATED TO NEW OR TRANSFERRED PROGRAMS CAN ADVERSELY
      AFFECT OUR OPERATING RESULTS AND MAY NOT BE RECOVERABLE.**





Start-up
      costs, the management of labor and equipment resources in connection with
      establishing new programs and new customer relationships, and the need to
      estimate required resources, and the timing of those resources in advance of
      production, can adversely affect our gross margins and operating margins. If
      new
      programs or new customer relationships are terminated or delayed, our operating
      results may be harmed, particularly in the near term. We may not be able to
      recoup our start-up costs or quickly replace anticipated new program
      revenues.





**MOST
      OF THE CUSTOMERS IN OUR INDUSTRY DO NOT COMMIT TO LONG-TERM PRODUCTION
      SCHEDULES, WHICH CAN MAKE IT DIFFICULT FOR US TO SCHEDULE PRODUCTION.**





Customers
      may cancel their orders, change production quantities or delay production for
      a
      number of reasons that are beyond our control. Cancellations, reductions or
      delay by a significant customer or by a group of customers could negatively
      impact our operating results. Such cancellations, reductions or delays have
      occurred and may continue to occur. The volume and timing of sales to our
      customers may vary due to:





·
            variation
                in demand for our customers' products in their end
                markets


·
            our
                customers' attempts to manage their
                inventory


·
            electronic
                design changes


·
            changes
                in our customers' manufacturing
                strategy


·
            recessionary
                conditions in customers' industries





Due
      in
      part to these factors, most of our customers do not commit to firm production
      schedules. We make significant decisions based on our estimates of customers’
requirements, including deciding on the levels of business that we will seek,
      production schedules, component procurement commitments, equipment requirements,
      personnel needs and other resource requirements. The short-term nature of our
      customers’ commitments and the possibility of rapid changes in demand for their
      products reduce our ability to accurately estimate and forecast the future
      requirements of those customers. Since many of our costs and operating expenses
      are relatively fixed, a reduction in customer demand can impact our revenue
      and
      harm our gross margins and operating results.




7




**INCREASED
      COMPETITION MAY RESULT IN DECREASED DEMAND OR REDUCED PRICES FOR OUR
      SERVICES.**





We
      may be
      operating at a cost disadvantage compared to other electronic manufacturing
      service providers who have greater direct buying power from component suppliers,
      distributors and raw material suppliers or who have lower cost structures as
      a
      result of their geographic location. As a result, competitors may have a
      competitive advantage. Our manufacturing processes are generally not subject
      to
      significant proprietary protection, and companies with greater resources or
      a
      greater market presence may enter our market or increase their competition
      with
      us. We also expect our competitors to continue to improve the performance of
      their current products or services, to reduce their current products or service
      sales prices and to introduce new products or services that may offer greater
      performance and improved pricing. Any of these could cause a decline in sales,
      loss of market acceptance of our products or services, profit margin
      compression, or loss of market share.





**OUR
      RECENT ACQUISITION MAY NOT RESULT IN THE BENEFITS AND REVENUE GROWTH WE
      EXPECT.**





In
      May
      2008, we completed our acquisition of Val-U-Tech Corp. We may continue to
      acquire additional businesses in the future. This acquisition and future
      acquisitions involve risks, including:





·
            integration
                and management of the operations;·
            retention
                of key personnel;·
            integration
                of information systems, internal procedures, accounts receivable
                and
                management, financial and operational controls;·
            retention
                of customer base of acquired businesses;·
            diversion
                of management’s attention from other ongoing business concerns; and
                exposure to unanticipated liabilities of acquired
                companies.





These
      and
      other factors could harm our ability to achieve anticipated levels of
      profitability or realize other anticipated benefits of an acquisition and could
      adversely affect our business and operating results.




**IF
      WE DO NOT MANAGE OUR BUSINESS EFFECTIVELY, OUR PROFITABILITY COULD
      DECLINE.**





Our
      ability to manage our business effectively will require us to continue to
      implement and improve our operational, financial and management information
      systems; continue to develop the management skills of our managers and
      supervisors; and continue to train, motivate and manage our employees. Our
      failure to effectively do so could harm our business.





**WE
      DEPEND ON A LIMITED NUMBER OF SUPPLIERS FOR COMPONENTS THAT ARE CRITICAL TO
      OUR
      MANUFACTURING PROCESSES. A SHORTAGE OF THESE COMPONENTS OR AN INCREASE IN THEIR
      PRICE COULD INTERRUPT OUR OPERATIONS AND REDUCE OUR
      PROFITS.**





Much
      of
      our net revenue is derived from turnkey manufacturing in which we provide
      materials procurement. While some of our customer agreements permit periodic
      adjustments to pricing based on decreases and increases in component prices
      and
      other factors, we typically bear the risk of component price increases that
      occur between any such re-pricing or, if such re-pricing is not permitted,
      during the balance of the term of the particular customer contract. Accordingly,
      certain component price increases could adversely affect our gross profit
      margins.





Almost
      all of the products we manufacture require one or more components that are
      available from a limited number of suppliers. Some of these components are
      allocated from time to time in response to supply shortages. In some cases,
      supply shortages could substantially curtail production of those assemblies
      using a particular component. At times, component shortages have been prevalent
      in our industry, and such shortages may be expected to recur from time to time.
      In some cases, supply shortages and delays in deliveries of particular
      components have resulted in curtailed or delayed production of assemblies,
      which
      contributed to an increase in our inventory levels. An increase in economic
      activity could result in shortages, if manufacturers of components do not
      adequately anticipate the increased orders and/or have previously excessively
      cut back their production capabilities in view of reduced activity in recent
      years. World events, armed conflict and epidemics, could also affect our supply
      chain. An inability to obtain sufficient components on a timely basis could
      harm
      relationships with our customers.





In
      addition, due to the specialized nature of some components and the needs of
      our
      customers’ products, we may be required to use suppliers which are the sole
      provider of certain components. Such suppliers may encounter financial
      difficulties or may not have adequate financial resources, which could preclude
      them from delivering components on time or at all.




8


**OUR
      TURNKEY MANUFACTURING SERVICES INVOLVE INVENTORY RISK**





Most
      of
      our services are provided on a turnkey basis, where we purchase some or all
      of
      the materials required for product assembling and manufacturing. These services
      involve greater resource investment and inventory risk management than
      consignment services, where the customer provides materials. Accordingly,
      various component price increases and inventory obsolescence could adversely
      affect our selling price, gross margins and operating results.





In
      our
      turnkey operations, we must order parts and supplies based on customer
      forecasts, which may be for a larger quantity of product than is included in
      the
      firm orders ultimately received from those customers. Customers' cancellation
      or
      reduction of orders can result in additional expense to us. While most of our
      customer agreements typically include provisions which require customers to
      reimburse us for excess inventory specifically ordered to meet their forecasts,
      we actually may not be reimbursed on these obligations. In that case, we could
      have excess inventory and/or cancellation or return charges from our
      suppliers.




In
      addition, we are starting to provide managed inventory programs for some of
      our
      customers under which we hold and manage finished goods inventories. These
      managed inventory program may result in higher finished goods inventory level,
      further reduce our inventory turns and increase our financial exposure with
      such
      customers. Even though they will generally have contractual obligations to
      purchase such inventories from us, we may remain subject to the risk of
      enforcing those obligations.





**PRODUCTS
      WE MANUFACTURE MAY CONTAIN MANUFACTURING DEFECTS, WHICH COULD RESULT IN REDUCED
      DEMAND FOR OUR SERVICES AND LIABILITY CLAIMS AGAINST US.**





We
      manufacture products to our customers' specifications, which are highly complex
      and may, at times, contain design or manufacturing errors or failures. Despite
      our quality control and quality assurance efforts, defects may occur. Defects
      in
      the products we manufacture, whether caused by a customer design, manufacturing
      or component failure or error, may result in delayed shipments to customers
      or
      reduced or cancelled customer orders and may affect our business reputation.
      In
      addition, these defects may result in liability claims against us. Even if
      customers or component suppliers are responsible for the defects, they may
      be
      unwilling or unable to assume responsibility for any costs or
      payments.





**WE
      MAY NOT BE ABLE TO MAINTAIN OUR ENGINEERING, TECHNOLOGICAL AND MANUFACTURING
      PROCESS EXPERTISE.**





The
      markets for our manufacturing and engineering services are characterized by
      rapidly changing technology and evolving process development. The continued
      success of our business will depend upon our ability to:





·
            hire
                and retain our qualified engineering and technical
                personnel;·
            maintain
                and enhance our technological leadership; and·
            develop
                and market manufacturing services that meet changing customer needs.





Although
      we believe that our operations provide the assembly and testing technologies,
      equipment and processes that are currently required by our customers, we cannot
      be certain that we will develop the capabilities required by our customers
      in
      the future. The emergence of new technology industry standards or customer
      requirements may render our equipment, inventory or processes obsolete or
      noncompetitive. In addition, we may have to acquire new assembly and testing
      technologies and equipment to remain competitive. The acquisition and
      implementation of new technologies and equipment may require significant expense
      or capital investment, which could reduce our operating margins and our
      operating results. Our failure to anticipate and adapt to our customers'
      changing technological needs and requirements could have an adverse effect
      on
      our business.





**WE
      DO NOT HAVE EMPLOYMENT AGREEMENTS WITH ANY OF OUR KEY PERSONNEL, THE LOSS OF
      WHICH COULD HURT OUR OPERATIONS.**





Our
      continued success depends largely on the efforts and skills of our key
      managerial and technical employees. The competition for these individuals is
      significant; hence the loss of the services of certain of these key employees
      or
      an inability to attract or retain qualified employees could negatively impact
      us. We do not have employment agreements or non-competition agreements with
      our
      key employees.





**COMPLIANCE
      OR THE FAILURE TO COMPLY WITH CURRENT AND FUTURE ENVIRONMENTAL REGULATIONS
      COULD
      CAUSE US SIGNIFICANT EXPENSE.**





We
      are
      subject to a variety of federal, state, local and foreign environmental
      regulations relating to the use, storage, discharge and disposal of hazardous
      chemicals used during our manufacturing process. If we fail to comply with
      any
      present and future regulations, we could be subject to future liabilities or
      the
      suspension of production. In addition, such regulations could restrict
      our ability to expand our facilities or could require us to acquire costly
      equipment, or to incur other significant expenses to comply with environmental
      regulations. While we are not currently aware of any violations, we may have
      to
      spend funds to comply with present and future regulations or be required to
      perform site remediation.




9


**IF
      WE ARE UNABLE TO MAINTAIN EFFECTIVE INTERNAL CONTROL OVER OUR FINANCIAL
      REPORTING, INVESTORS COULD LOSE CONFIDENCE IN THE RELIABILITY OF OUR FINANCIAL
      STATEMENTS, WHICH COULD RESULT IN A REDUCTION IN THE VALUE OF OUR COMMON
      STOCK.**





As
      required by Section 404 of the Sarbanes-Oxley Act, the SEC adopted rules
      requiring public companies to include a report of management on the company’s
      internal control over financial reporting in their annual reports on Form 10-K;
      that report must contain an assessment by management of the effectiveness of
      our
      internal control over financial reporting.





We
      are
      continuing our comprehensive efforts to comply with Section 404 of the
      Sarbanes-Oxley Act. If we are unable to maintain effective internal control
      over
      financial reporting, this could lead to a failure to meet reporting obligations
      to the SEC, which in turn could result in an adverse reaction in the financial
      markets due to a loss of confidence in the reliability of our financial
      statements.





**THE
      AGREEMENTS GOVERNING OUR DEBT CONTAIN VARIOUS COVENANTS THAT IMPACT THE
      OPERATION OF OUR BUSINESS.**





The
      agreements and instruments governing our existing debt and our secured credit
      facility contain various restrictive covenants that, among other things, require
      us to comply with or maintain certain financial tests and ratios including,
      among others, limitations on the amount available under the revolving line
      of
      credit relative to the borrowing base, capital expenditures and minimum earnings
      before interest, taxes, depreciation and amortization, rent and lease payments
      and stock option expense(EBITDARS) and restrict our ability to:





·
            incur
                debt;


·
            incur
                or maintain liens;


·
            make
                acquisitions of businesses or
                entities;


·
            make
                investments, including loans, guarantees and
                advances;


·
            engage
                in mergers, consolidations or certain sales of
                assets;


·
            engage
                in transactions with affiliates;
                and


·
            pay
                dividends or engage in stock redemptions or
                repurchases.





Our
      credit facilities are secured by a general security agreement in the assets
      of
      the Company and its subsidiaries, a pledge of the Company’s equity interest in
      its subsidiary, a negative pledge on the Company’s real property, and a
      guarantee by the Company’s subsidiary.





Our
      ability to comply with covenants contained in our existing debt and secured
      credit facility may be affected by events beyond our control, including
      prevailing economic, financial and industry conditions. Our failure to comply
      with our debt-related covenants could result in an acceleration of our
      indebtedness and cross-defaults under our other indebtedness, which may have
      a
      material adverse effect on our financial condition. We are currently in
      compliance with all of our covenants.





**OUR
      STOCK PRICE MAY BE VOLATILE DUE TO FACTORS BEYOND OUR
      CONTROL.**





Our
      common stock is traded on the Over-the-Counter Bulletin Board. The market price
      of our common stock has fluctuated substantially in the past and could fluctuate
      substantially in the future, based on a variety of factors, including future
      announcements concerning us or our key customers or competitors, government
      regulations, litigation, fluctuations in quarterly operating results, or general
      conditions in the EMS industry.





**ITEM
      1B. UNRESOLVED STAFF COMMENTS**





Not
      Applicable





**ITEM
      2. PROPERTIES**





We
      own
      our administrative and main manufacturing facility which is located in Newark,
      New York and contains an aggregate of approximately 300,000 square feet. We
      also
      lease a manufacturing facility in Victor, New York, which contains an aggregate
      of approximately 18,000 square feet. We believe that our properties are
      generally in good condition, are well maintained, and are generally suitable
      and
      adequate to carry on our business in its current form.





**ITEM
      3. LEGAL PROCEEDINGS**





There
      are
      no material legal proceedings pending to which IEC or its subsidiary is a party
      or of which any of their property is the subject. To our knowledge, there are
      no
      material legal proceedings to which any director, officer or affiliate of IEC,
      or any beneficial owner of more than five percent (5%) of Common Stock of IEC,
      or any associate of any of the foregoing, is a party adverse to IEC or its
      subsidiary or has a material interest adverse to IEC or its
      subsidiary.





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





During
      the fourth quarter of fiscal 2008, no matters were submitted to vote of security
      holders.




10




**EXECUTIVE
      OFFICERS OF THE REGISTRANT**





IEC's
      executive officers as of September 30, 2008, were as follows:





Name
            
            Age
            
            PositionW.
                Barry Gilbert
            
            62
            
            Chairman
                of the Board, and Chief Executive OfficerJeffrey
                T. Schlarbaum
            
            42
            
            Executive
                Vice President and President of IEC Contract
                ManufacturingMichael
                R. Schlehr
            
            46
            
            Vice
                President and Chief Financial OfficerDonald
                S. Doody
            
            42
            
            Senior
                Vice President of Operations





W.
      Barry
      Gilbert has served as Chief Executive Officer since June 2002. He has been
      a
      director of IEC since February 1993, and Chairman of the Board since February
      2001. He is an adjunct faculty member at the William E. Simon Graduate School
      of
      Business Administration of the University of Rochester. Mr. Gilbert previously
      held the position of President of the Thermal Management Group of Bowthorpe
      (now
      known as Spirent) and was corporate Vice President and President of the
      Analytical Products Division of Milton Roy Company, a manufacturer of analytical
      instrumentation. He holds an MBA from the University of Rochester in Applied
      Economics and Finance.





Jeffrey
      T. Schlarbaum was promoted to Executive Vice President and President of IEC
      Contract Manufacturing in May 2008. He joined IEC in May 2004 as Vice President
      of Sales and Marketing and in November 2006 he was appointed Executive Vice
      President of Sales and Marketing. Before joining IEC, he had over 15 years
      of
      sales experience in the electronics industry. Most recently, he served as
      Regional Vice President of Sales for Plexus Corp., a contract manufacturer
      of
      electronics products, Neenah, Wisconsin. Prior to that, he worked as Vice
      President of Sales, Eastern Region for MCMS as well as holding various senior
      sales and marketing management positions with MACK Technologies and Conner
      Peripherals. He holds a Bachelors of Business Administration degree from
      National University, and an MBA from Pepperdine University.





Michael
      R. Schlehr joined IEC in February of 2008 with more than 20 years experience
      in
      operations and financial management for manufacturers in diverse
      industries.  Mr. Schlehr started his career with RJR Nabisco in various
      facility accounting roles and eventually as a Senior Investment Analyst at
      the
      corporate level.  He was a Controller and Production Manager for a
      subsidiary of Smurfit/Stone.  Mr. Schlehr held positions of Operations
      Manager and Corporate Controller before relocating to Rochester, NY for Birdseye
      Foods, Inc. where he functioned as Director of Operations Accounting.  Mr.
      Schlehr’s most recent position was Vice President of Finance and Administration
      for the Process Solutions Division of Robbins & Myers, Inc.  He holds a
      BS degree with Honors in dual majors of Accounting and Management from Canisius
      College in Buffalo, NY.





Donald
      S.
      Doody, was promoted to Senior Vice President of Operations in May 2008. He
      joined IEC in November 2004 as Vice President of Operations. Before joining
      IEC,
      he had more than 8 years of experience in the contract electronics manufacturing
      industry. He started his career with GE Transportation and Industrial Systems
      and became a Master Black Belt/Supplier Quality Engineer. Mr. Doody was a senior
      manufacturing engineer at Plexus Corporation, then became VP/GM of MCMS’s North
      Carolina facility. When Plexus acquired MCMS he became responsible for leading
      Lean Manufacturing and Six Sigma initiatives throughout the company. Mr. Doody
      holds a BS degree in Engineering from the State University of New York, Buffalo
      and a Master’s degree in Industrial Science from Colorado State
      University.




11




**PART
      II**




ITEM 5.
              MARKET
                  FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
                  ISSUER
                  PURCHASESOF
                  EQUITY SECURITIES





(a)
      Market Information.





IEC's
      Common Stock is listed on The Over-the-Counter Bulletin Board ("OTCBB") under
      the symbol IECE.OB.




The
      following table sets forth, for the fiscal quarter indicated, the high and
      low
      closing prices for the Common Stock as reported on the OTCBB. These quotations
      reflect inter-dealer prices, without mark-up, mark-down or commission, and
      may
      not represent actual transactions.





Quarter
            
            High
            
            LowOctober
                1, 2005 – December 30, 2005
            
            $
            0.74
            
            $
            0.41December
                31, 2005 – March 31, 2006
            
            $
            0.93
            
            $
            0.55April
                1, 2005- June 30, 2006
            
            $
            0.85
            
            $
            0.60July
                1, 2006- September 30, 2006
            
            $
            1.15
            
            $
            0.77October
                1, 2006 – December 29, 2006
            
            $
            1.75
            
            $
            1.09December
                30, 2006 – March 30, 2007
            
            $
            1.66
            
            $
            1.41March
                31, 2007 – June 29, 2007
            
            $
            1.98
            
            $
            1.48June
                30, 2007 – September 30, 2007
            
            $
            2.05
            
            $
            1.75October
                1, 2007 – December 28, 2007
            
            $
            2.50
            
            $
            1.60December
                29, 2007 – March 28, 2008
            
            $
            1.90
            
            $
            1.60March
                29, 2008 – June 27, 2008
            
            $
            2.20
            
            $
            1.50June
                28, 2008 – September 30, 2008
            
            $
            2.20
            
            $
            1.76





The
      closing price of IEC's Common Stock on the OTCBB on November 6, 2008, was $1.70
      per share.





(b)
      Holders.





As
      of
      November 6, 2008, there were approximately 165 holders of record of IEC's Common
      Stock. Many of our shares of Common Stock are held in street name by brokers
      and
      other institutions, and we are unable to estimate the number of their beneficial
      stockholders.





(c)
      Dividends.





IEC
      has
      never paid dividends on its Common Stock. It is the current policy of the Board
      of Directors of IEC to retain earnings for use in our business. Certain
      financial covenants set forth in IEC's current loan agreement prohibit IEC
      from
      paying cash dividends. We do not plan to pay cash dividends on our Common Stock
      in the foreseeable future.





(d)
      Securities Authorized for Issuance under Equity Compensation Plans





The
      following table sets forth information concerning IEC's equity compensation
      plans as of September 30, 2008.





Plan Category
            
            Number of securities
              to be issued upon
              exercise of
              outstanding options,
              warrants and rights
            
            Weighted-average
              exercise price of
              outstanding options,
              warrants and rights
            
            Number of securities
              remaining available for
              future issuance under
              equity compensation plans
              (excluding securities
              reflected in column (a))(a)
            
            (b)
            
            (c)Equity
                compensation plans:approved
                by security holders
            
            
            1,412,537
            
            $
            0.97
            
            
            582,118not
                approved by security holders
            
            
            -
            
            
            NA
            
            
            -Total
            
            
            1,412,537
            
            $
            0.97
            
            
            582,118





Issuance
                of Unregistered Securities:
            Not
                ApplicableRepurchases
                of IEC Securities:
            We
                repurchased no shares during the last quarter of fiscal
                2008.


12





Item
      6.
      SELECTED FINANCIAL DATA





IEC
      ELECTRONICS CORP. AND ITS SUBSIDIARIES


SELECTED
      FINANCIAL DATA


(in
      thousands, except per share data)





Years
                Ended September 30,
            
            2008
            
            2007
            
            2006
            
            2005
            
            2004INCOME
                STATEMENT DATANet
                sales
            
            $
            51,092
            
            $
            40,914
            
            $
            22,620
            
            $
            19,066
            
            $
            27,701Gross
                profit (loss)
            
            $
            6,217
            
            $
            3,877
            
            $
            2,753
            
            $
            2,630
            
            $
            1,987Operating
                income (loss)
            
            $
            2,392
            
            $
            985
            
            $
            598
            
            $
            346
            
            $
            (759
            )Net
                income (loss)
            
            $
            10,477
            
            $
            875
            
            $
            215
            
            $
            285
            
            $
            (828
            )Net
                income (loss) per common and common equivalent share:Basic
            
            $
            1.22
            
            $
            0.11
            
            $
            0.03
            
            $
            0.03
            
            $
            (0.10
            )Diluted
            
            $
            1.12
            
            $
            0.10
            
            $
            0.03
            
            $
            0.03
            
            $
            (0.10
            )Common
                and common equivalent sharesBasic
            
            
            8,554
            
            
            8,114
            
            
            7,973
            
            
            8,261
            
            
            8,119Diluted
            
            
            9,337
            
            
            8,896
            
            
            8,276
            
            
            8,571
            
            
            8,119BALANCE
                SHEET DATAWorking
                capital
            
            $
            4,254
            
            $
            2,970
            
            $
            2,202
            
            $
            2,038
            
            $
            726Total
                assets
            
            $
            33,520
            
            $
            11,845
            
            $
            11,718
            
            $
            5,538
            
            $
            8,530Long-term
                debt, including current maturities
            
            $
            10,008
            
            $
            1,751
            
            $
            4,164
            
            $
            937
            
            $
            2,366Shareholders'
                equity
            
            $
            15,976
            
            $
            4,163
            
            $
            3,092
            
            $
            3,020
            
            $
            2,616





Note:
      Comparability of 2008 to prior year data is affected by the 2008 acquisition
      of
      Val-U-Tech.


13





ITEM
      7.
      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS




MANAGEMENT'S
      DISCUSSION OF OPERATIONS





The
      information in this Management's Discussion & Analysis should be read in
      conjunction with the accompanying financial statements, the related Notes to
      Financial Statements and the Five-Year Summary of Financial Data.
      Forward-looking statements in this Management's Discussion and Analysis are
      qualified by the cautionary statement preceding Item 1 of this Form
      10-K.





Overview





During
      2004, we refocused our sales efforts on high technology products that are less
      likely to migrate to offshore suppliers due to proprietary technology content,
      governmental restriction or volume considerations. Since then we have continued
      to expand our business adding new customers and new markets. Our customer base
      is stronger and more diverse than ever. We continue to expand in areas we view
      as important for our continued growth. IEC is ISO-9001:2000 registered, and
      an
      NSA approved supplier under the COMSEC standard. Both IEC and Val-U-Tech, our
      newly acquired cable harness and interconnect business, are AS9100 certified
      to
      service the military and commercial aerospace market sector. We have identified
      and gained entry into advantageous markets by leveraging our ability to provide
      products of the highest quality and reliability, including significantly
      complex, low-run volume assemblies. Currently, the markets we serve include
      military, governmental agencies, aerospace, communications, medical, computing
      and a variety of industrial sectors. Our backlog of business has grown
      significantly and we enter fiscal 2009 with $40.5 million in backlog plus
      customer forecasts for an additional $3.4 million. We continue to improve our
      internal bench strength and skills, our reliability testing capabilities and
      our
      machinery and equipment infrastructure to optimize production performance and
      effectively manage the steady growth in volume and complexity that we are
      experiencing. Despite the recessionary outlook for the economy, based upon
      cautiously optimistic comments from our customers in the military and aerospace
      sectors, we expect continued growth in both revenue and profitability throughout
      fiscal 2009.




Analysis
      of Operations





Sales
      (dollars in millions)




For
                Year Ended September 30,
            
            2008
            
            2007
            
            2006Net
                sales
            
            $
            51.1
            
            $
            40.9
            
            $
            22.6




IEC’s
      revenue has grown 25% over 2007 and 126% over the sales achieved in 2006. This
      significant growth has been fueled by the expansion and diversification
      discussed above, as well as by the recent strategic acquisition of our
      Val-U-Tech cable and interconnect business. The most significant revenue growth
      in recent years has occurred for IEC in the military and industrial market
      sectors.




Gross
      Profit (dollars in thousands and as a % of Net Sales)





For
                Year Ended September 30,
            
            2008
            
            2007
            
            2006Gross
                profit
            
            $
            6,217
            
            $
            3,877
            
            $
            2,753Gross
                profit percent
            
            
            12.2
            %
            
            9.5
            %
            
            12.2
            %




Gross
      profit as a percentage of sales was significantly improved over 2007. The
      improvement of 2.7 percentage points of gross margin at a materially higher
      revenue level further demonstrates that IEC is a strong company showing
      tangible, bottom line results on sales growth. This improvement in gross margin
      was expected and was discussed in the 2007 year end SEC filing. In fiscal 2007
      IEC endured a transition from low volume prototype work to new programs with
      larger production volumes. The associated learning curves for new employees
      and
      for new products affected our efficiency and therefore our profitability. In
      fiscal 2008 labor efficiency improved through effective training of production
      employees, investments in capital equipment that served to modernize some
      processes, and through further implementation of continuous improvement and
      lean
      manufacturing principles. Our workforce has expanded in size and in capability.
      Because of our execution, our customers have rewarded us with ongoing programs
      and additional business. The ongoing programs have become a stable core of
      our
      operation. IEC expects this drive for increased productivity to result in
      additional future improvements in gross margin going forward. A further
      improvement to our gross margin was realized as a result of acquiring the
      Val-U-Tech interconnect business.





14





Selling
      and Administrative Expense (dollars in thousands and as a % of Net
      Sales)





For
                Year Ended September 30,
            
            2008
            
            2007
            
            2006Selling
                and administrative expense
            
            $
            3,825
            
            $
            2,892
            
            $
            2,155Selling
                and administrative expense percent
            
            
            7.5
            %
            
            7.1
            %
            
            9.5
            %





Selling
      and administrative expenses as a percentage of sales increased slightly to
      7.5%
      in fiscal 2008 compared to 7.1% in fiscal 2007. However, at 7.5%, Selling and
      Administrative expenses remain significantly below the 9.5% experienced in
      2006.
      In total dollars, the spending has increased over the three year period albeit
      at a slower rate than the increase in sales. The increased spending in Selling
      and Administrative was $0.9 million from fiscal 2007 to fiscal 2008 inclusive
      of
      $0.3 million of Selling and Administrative expense absorbed through the
      acquisition of Val-U-Tech. The remaining increase in spending of $0.6 million
      is
      largely the result of costs incurred to strengthen our Sales and Marketing
      team,
      our Finance department and our Information Systems and Technology group.
      Additionally, we added cost in 2008 for an investor relations resource.





Other
      Income and Expense (dollars in millions)





For
                Year Ended September 30,
            
            2008
            
            2007
            
            2006Interest
                and financing expense
            
            $
            0.5
            
            $
            0.4
            
            $
            0.4Other
                (income)/expense
            
            $
            0.3
            
            $
            -
            
            $
            -





Interest
      and financing expense increased slightly from $440,000 in 2007 to $452,000
      in
      2008. IEC assumed additional debt at the end of May, 2008 to fund the
      acquisition of Val-U-Tech but concurrently benefited from lower interest rates.
      The M&T Bank credit facility is more advantageous than our agreement with
      our previous senior lender. Additionally, the prime rate continued to decline
      throughout fiscal 2008. The average month end debt balance during fiscal 2008
      was $ 6.1 million. Our average month end debt balance during fiscal 2007 was
      $
      2.9 million.





We
      had
“Other expense” of $0.3 million during fiscal 2008 versus no material “other
      expenses” in recent years. This was primarily attributable to legal and
      settlement costs related to the GE litigation which had continued for the six
      previous years(See financial statement note #9). Additionally, there was a
      termination fee associated with exiting the credit agreement with our previous
      senior lender.





Income
      Taxes (dollars in thousands)





For
                Year Ended September 30,
            
            2008
            
            2007
            
            2006Effective
                tax (benefit)
            
            $
            (
                8,843
            )
            $
            (
                372
            )
            
            -





Our
      2008
      tax benefit included an $8,883,274 reversal of the valuation allowance against
      our deferred tax asset, and a $40,000 provision for current taxes due. The
      reversal of the valuation allowance was based on management’s belief that this
      portion of the deferred tax asset will be realized. We continue to maintain
      a
      $3.3 million valuation allowance against our net deferred tax assets, which
      are
      comprised primarily of NY State investment tax credits.





Our
      2007
      tax benefit included a $390,000 reversal of the valuation allowance against
      our
      deferred tax asset, and an $18,000 provision for current taxes due. At that
      time
      we had a $19 million valuation allowance against our net deferred tax assets.
      Further detailed discussion of the deferred tax asset and valuation allowance
      appears later in this filing. (See financial statement note #5)


15





Liquidity
      and Capital Resources





Cash
      Flow
      provided by (used in) operating activities was $0.1 million for the fiscal
      year
      ended September 30, 2008 compared to $3.1 million for fiscal 2007. A principal
      reason for this variance of ($3.0) million versus prior year is related to
      working capital changes associated with our company’s expansion. Exceptionally
      strong achievement in fourth quarter 2008 shipments resulted in increased year
      end receivables and therefore a use of cash of ($2.5) million, a variance versus
      prior year of ($1.3) million. Additionally, the increased shipment volume and
      overall continued growth of IEC’s business drove an increase ($0.6) million in
      cash invested in inventory, a variance of ($2.4) million versus prior year.
      The
      increase in year end payables is consistent with the increased inventory at
      year
      end and was a source of $0.8 million in cash, a variance of ($0.3) versus prior
      year. Offsetting these variances to prior year and consistent with the growth
      IEC is experiencing, our source of cash from earnings increased by $1.0 million
      versus prior year.





Cash
      Flow
      provided by (used in) investing activities was ($4.4) million for the fiscal
      year end versus ($0.8) million for fiscal 2007. As defined in detail in the
      acquisition section of this filing (See financial statement note #3), IEC
      invested cash of ($5.5) million as part of the purchase of its wholly owned
      subsidiary Val-U-Tech. During fiscal 2008 we invested ($1.4) million in new
      production equipment to improve efficiency and capacity. This investment nearly
      doubled the fiscal 2007 investment of ($0.8) million, further demonstrating
      IECs
      continued commitment to growth. Offsetting these uses of cash, IEC received
      $2.0
      million in proceeds from the sale of equipment to our senior lender.
      Additionally, the acquired company provided beginning cash of $0.5 million.





Cash
      Flow
      provided by (used in) financing activities was a source of $4.4 million in
      fiscal 2008 versus a net usage of ($2.3) million in fiscal 2007. The variance
      year over year is attributable to the funding from our new credit facility
      to
      enable the acquisition and expansion experienced in fiscal 2008 versus the
      net
      pay-down of debt which occurred during fiscal 2007. At September 30, 2008 we
      had
      a $5.0 million balance under our revolving credit facility. The maximum
      borrowing limit under our revolving credit facility is limited to the lesser
      of
      (i) $9.0 million or (ii) an amount equal to the sum of 85% of the receivables
      borrowing base and 35% of the inventory borrowing base. On September 30, 2008,
      the remaining availability under the collateralized portion of our line of
      credit was $4.0 million. We believe that our liquidity is adequate to cover
      operating requirements for the next 12 months.





The
      Company entered into a $14.2 million senior secured loan agreement (Credit
      Agreement) and Sale Leaseback agreement with Manufacturers and Traders Trust
      Company (M&T Bank) on May 30, 2008. The following is a summary of the credit
      and sale leaseback agreements:





§
            A
                revolving credit facility up to $9.0 million, available for direct
                borrowings. The facility is based on a borrowing base formula equal
                to the
                sum of 85% of eligible receivables and 35% of eligible inventory.
                The
                credit facility matures on May 30, 2013. Interest on the revolver
                is
                either prime or a stated rate over LIBOR, whichever is lower based
                on
                certain ratios. During the 4th quarter of fiscal 2008 we determined
                that
                the committed revolving credit facility with our senior lender would
                more
                accurately be classified as a long term
                debt.




§
            A
                $1.7 million term loan amortized equally over 60 months beginning
                July
                2008. The Company’s interest rate is fixed at 6.7%. As a result of strong
                cash flow for the period, IEC made an advance payment of $0.5 million
                toward the term loan principal, in addition to the regular monthly
                amortization.





§
            An
                available $1.5 million equipment line of credit which will be amortized
                equally over 60 months and mature on May 30, 2013. Interest on the
                equipment line is either prime or a stated rate over LIBOR, whichever
                is
                lower based on certain ratios at the time of
                borrowing.





§
            A
                $2.0 million Sale Leaseback of the Company’s fixed assets amortized
                equally over 60 months beginning June 27,
                2008.





§
            All
                loans and the Sale-Leaseback are secured by a security interest in
                the
                assets of IEC and its subsidiaries; a pledge of all the Company’s equity
                interest in Val-U-Tech, a negative pledge on the Company’s real property
                and a guaranty by Val-U-Tech.





In
      connection with the acquisition of Val-U-Tech and the payment of the purchase
      price to the sellers, a portion of the purchase price was paid in the
      form of promissory notes (the "Seller Notes") in the aggregate principal
      amount of $3.9 million with interest at the rate of 4% per annum.





16





The
      Company’s financing agreements contain various affirmative and negative
      covenants concerning the ratio of “EBITDARS” (Earnings Before Interest, Taxes,
      Depreciation, Amortization, Rent Expense under the Sale Leaseback and Stock
      Option Expense) to total debt and to fixed charges. These are calculated on
      a
      twelve month rolling basis. The Company must also maintain a minimum EBITDARS
      level of $350,000 per individual quarter. The Company was compliant with these
      covenants as of September 30, 2008. The table below provides details on the
      Company’s performance relative to each of the three covenants as of September
      30, 2008:





Covenant
            
            Requirement
            
            Actual Performance§Minimum
                  quarterly EBITDARS
            
            $
            ≥
                350,000
            
            $
            1,180,000§Fixed
                Charge
                Coverage
            
            
            ≥
                1.1x
            
            
            4.1x§Total
                Debt to
                EBITDARS
            
            
            <
                3.75x
            
            
            2.8x





Application
      of Critical Accounting Policies





Our
      financial statements and accompanying notes are prepared in accordance with
      generally accepted accounting principles in the United States. Preparing
      financial statements requires management to make estimates and assumptions
      that
      affect the reported amounts of assets, liabilities, revenue, and expenses.
      These
      estimates and assumptions are affected by management's application of accounting
      policies. Critical accounting policies for us include revenue recognition,
      provisions for doubtful accounts, provisions for inventory obsolescence,
      impairment of long-lived assets, accounting for legal contingencies and
      accounting for income taxes.





We
      recognize revenue in accordance with Staff Accounting Bulletin No.101, "Revenue
      Recognition in Financial Statements." Sales are recorded when products are
      shipped to customers. Provisions for discounts and rebates to customers,
      estimated returns and allowances and other adjustments are provided for in
      the
      same period the related sales are recorded.





We
      evaluate our long-lived assets for financial impairment on a regular basis
      in
      accordance with Statement of Financial Accounting Standards No. 144, "Accounting
      for the Impairment or Disposal of Long-Lived Assets." We evaluate the
      recoverability of long-lived assets not held for sale by measuring the carrying
      amount of the assets against the estimated undiscounted future cash flows
      associated with them. At the time such evaluations indicate that the future
      discounted cash flows of certain long-lived assets are not sufficient to recover
      the carrying value of such assets, the assets are adjusted to their fair
      values.





From
      time
      to time we are subject to various legal proceedings and claims, the outcomes
      of
      which are subject to significant uncertainty. Statement of Financial Accounting
      Standards No. 5, "Accounting for Contingencies", requires that an estimated
      loss
      from a loss contingency should be accrued by a charge to income if it is
      probable that an asset has been impaired or a liability has been incurred and
      the amount of the loss can be reasonably estimated.





Disclosure
      of a contingency is required if there is at least a reasonable possibility
      that
      a loss has been incurred. We evaluate, among other factors, the degree of
      probability of an unfavorable outcome and the ability to make a reasonable
      estimate of the amount of loss. Changes in these factors could materially impact
      our financial position or our results of operations.





Statement
      of Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
      establishes financial accounting and reporting standards for the effect of
      income taxes. The objectives of accounting for income taxes are to recognize
      the
      amount of taxes payable or refundable for the current year and deferred tax
      liabilities and assets for the future tax consequences of events that have
      been
      recognized in an entity's financial statements or tax returns. Judgment is
      required in assessing the future tax consequences of events that have been
      recognized in our financial statements or tax returns. Fluctuations in the
      actual outcome of these future tax consequences could impact our financial
      position or our results of operations.





Impact
      of
      Inflation





The
      impact of inflation, more particularly fuel prices, has been challenging on
      our
      operations. To date the impact has been minimal due to the fact that we have
      been able to adjust many of our bids to reflect most inflationary increases
      in
      costs; however it is not clear this will continue and in turn could affect
      our
      margins.





17





RECENTLY
      ISSUED ACCOUNTING STANDARDS





In
      June 2006, the Emerging Issues Task Force (“EITF”) reached a consensus on
      EITF Issue No. 06-4 Accounting for Deferred Compensation and Postretirement
      Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements (“EITF
      06-4”), which requires the Company to recognize a postretirement liability for
      the discounted future benefit obligation that the Company will have to pay
      upon
      the death of the underlying insured employee. EITF 06-4 is effective for
      financial statements issued for fiscal years beginning after December 15, 2007.
      As such, the Company is required to adopt these provisions beginning with the
      fiscal year ending September 30, 2009. The Company is currently evaluating
      the
      adoption of this pronouncement.





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 157, "Fair Value
      Measurements”. SFAS 157 defines fair value, establishes a framework for
      measuring fair value, and expands disclosures about fair value measurements.
      SFAS 157 is effective as of the beginning of the first fiscal year that begins
      after November 15, 2007. As such, the Company is required to adopt these
      provisions at the beginning of the fiscal year ending September 30, 2009. The
      Company is currently evaluating the impact of SFAS 157 but does not expect
      it to
      have a material effect on its consolidated financial statements.




In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 159, "The Fair Value
      Option for Financial Assets and Financial Liabilities, including an amendment
      of
      FASB Statement No. 115”. SFAS 159 permits entities to choose to measure many
      financial instruments and certain other items at fair value at specified
      election dates. SFAS 159 is effective as of the beginning of an entity’s first
      fiscal year that begins after November 15, 2007. As such, the Company is
      required to adopt these provisions at the beginning of the fiscal year ending
      September 30, 2009. The Company is currently evaluating the impact of SFAS
      159
      but does not expect it to have a material effect on its consolidated financial
      statements.





In
      December 2007, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards (“SFAS”) No. 141(R), “Business
      Combinations”. SFAS 141(R) establishes principles and requirements for how the
      acquirer recognizes and measures in its financial statements the identifiable
      assets acquired, the liabilities assumed, any non-controlling interest in the
      acquiree, recognizes and measures the goodwill acquired in the business
      combination or a gain from a bargain purchase, and determines what information
      to disclose to enable users of the financial statements to evaluate the nature
      and financial effects of the business combination. SFAS 141(R) is effective
      for
      fiscal years, and interim periods within those fiscal years, beginning on or
      after December 15, 2008. As such, the Company is required to adopt these
      provisions at the beginning of the fiscal year ended September 30, 2010. The
      Company is currently evaluating the impact of SFAS 141(R) but does not expect
      it
      to have a material effect on its consolidated financial statements.





In
      December 2007, the SEC issued Staff Accounting Bulletin No. 110 (“SAB
      110”). SAB 110 permits companies to continue to use the simplified method, under
      certain circumstances, in estimating the expected term of “plain vanilla”
options beyond December 31, 2007. SAB 110 updates guidance provided in SAB
      107
      that previously stated that the Staff would not expect a company to use the
      simplified method for share option grants after December 31, 2007. The
      Company is currently evaluating the impact of SAB 110 but does not expect it
      to
      have a material effect on its consolidated financial statements.





In
      December 2007, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standard (“SFAS”) No. 160, "Non-controlling Interests in
      Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160
      establishes accounting and reporting standards for the non-controlling interest
      in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is
      effective for fiscal years, and interim periods within those fiscal years,
      beginning on or after December 15, 2008. As such, the Company is required to
      adopt these provisions at the beginning of the fiscal year ended September
      30,
      2010. The Company is currently evaluating the impact of SFAS 160 but does not
      expect it to have a material effect on its consolidated financial
      statements.





ITEM
      7A.
      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Quantitative
      and Qualitative Disclosures about Market Risk represents the risk of loss that
      may impact the financial position, results of operations or cash flows of IEC
      due to adverse changes in financial rates. We are exposed to market risk in
      the
      area of interest rates. One exposure is directly related to our Revolving Credit
      borrowings under the Credit Agreement, due to the variable interest rate
      pricing. Management believes that interest rate fluctuations will not have
      a
      material impact on IEC's results of operations.





ITEM
      8.
      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





The
      information required by this item is incorporated herein by reference to pages
      25 through 38 of this Form 10-K and is indexed under Item 15(a)(1) and
      (2).




18




ITEM
      9.
      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





There
      have been no changes in or disagreements on accounting and financial disclosure
      matters.




ITEM
      9A(t) CONTROLS AND PROCEDURES





(a)
      Evaluation of disclosure controls and procedures





An
      evaluation was performed under the supervision and with the participation of
      IEC's management, including our Chief Executive Officer and Chief Financial
      Officer, of the effectiveness of the design and operation of the disclosure
      controls and procedures associated with the “base IEC business”, excluding the
      recently acquired Val-U-Tech operation, as of the end of the period covered
      by
      this Annual Report on Form 10-K as required by Rule 13a-15 under the Securities
      Exchange Act of 1934 (the "Exchange Act"). Based on that evaluation, our Chief
      Executive Officer and Chief Financial Officer have concluded that “base IEC
      business, excluding the Val-U-Tech operation, has disclosure controls and
      procedures which were effective as of the end of the period covered by this
      Annual Report on Form 10-K to provide reasonable assurance that information
      required to be disclosed by IEC in the reports that it files or submits under
      the Exchange Act is recorded, processed, summarized and reported within the
      time
      period specified in the SEC rules and forms and that such information is
      accumulated and communicated to our management (including the Chief Executive
      Officer and Chief Financial Officer) to allow timely decisions regarding
      disclosures. The Val-U-Tech operation will be evaluated in exactly the same
      manner and management will report on the effectiveness of controls of that
      operation as of September 30, 2009 in the 10-K filing.





(b)
      Changes in internal control over financial reporting





In
      connection with the evaluation described above, our management, including our
      Chief Executive Officer and Chief Financial Officer, identified no change in
      our
      internal control over financial reporting that occurred during our fiscal
      quarter ended September 30, 2008, that materially affected, or is reasonably
      likely to materially affect, our internal controls over financial reporting.





(c)
      Management's Report on Internal Control over Financial Reporting.




Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. Our internal control system was designed
      to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles in the United States of America.
      The Company’s internal control over financial reporting includes those policies
      and procedures that:




(i)
            pertain
                to the maintenance of records that, in reasonable detail, accurately
                and
                fairly reflect the transactions and dispositions of the Company,(ii)
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with generally
                accepted
                accounting principles, and that receipts and expenditures of the
                Company
                are being made only in accordance with authorizations of management
                and
                directors of the Company, and(iii)
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of the Company’s assets that
                could have a material effect on financial statements.





An
      evaluation, based on the framework entitled Internal Controls - Integrated
      Framework issued by the Committee of Sponsoring Organizations of the Treadway
      Commission(COSO), was performed under the supervision and with the participation
      of our management, including the principal executive officer and the principal
      financial officer, of the effectiveness of the design and operation of our
      procedures and internal control over financial reporting. Based on this
      evaluation, our management, including the principal executive officer and the
      principal financial officer, concluded that our internal control over financial
      reporting was effective in providing reasonable assurance regarding the
      reliability of financial reporting and the preparation of our financial
      statements for external purposes in accordance with generally accepted
      accounting principles as of September 30, 2008.





This
      annual report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting.
      Management's report on internal control over financial reporting was not subject
      to attestation by our independent registered public accounting firm pursuant
      to
      temporary rules of the Securities and Exchange Commission that permit us to
      provide only management's report in this annual report.




(d) Inherent
          Limitations of Internal Controls.





In
      designing and evaluating our internal control system, we recognize that any
      controls and procedures, no matter how well designed and operated, can provide
      only reasonable, not absolute, assurance of achieving the desired control
      objectives and that the effectiveness of any system has inherent limitations
      including, but not limited to, the possibility of human error and the
      circumvention or overriding of controls and procedures. Management, including
      the principal executive officer and the principal financial officer, is required
      to apply judgment in evaluating the cost-benefit relationship of possible
      controls and procedures. Because of the inherent limitations in a cost-effective
      control system, internal control over financial reporting may not prevent or
      detect misstatements. Although unlikely, misstatements due to error or fraud
      may
      occur and not be detected in a timely manner.




19




ITEM
      9B
      OTHER INFORMATION





The
      Rights Agreement dated as of June 2, 1998 between the Company and Chase Mellon
      Shareholder Services, L.L.C., as Rights Agent, terminated on June 15, 2008,
      upon
      expiration of the purchase rights, and is of no further force and effect. The
      Rights Agreement is described in the Company's Current Report on Form 8-K filed
      on July 1, 1998, which is incorporated by reference herein. The Board retains
      the right to adopt a new rights agreement in the future if it determines in
      the
      exercise of its fiduciary duties that such action is necessary or
      advisable.





**PART
      III**





ITEM
      10.
      DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





The
      information required by this item is presented under the captions entitled
      "Election of Directors” and “Section 16 (a) Beneficial Ownership Reporting
      Compliance” contained in the definitive proxy statement issued in connection
      with the 2009 Annual Meeting of Stockholders and is incorporated in this report
      by reference thereto. The information regarding Executive Officers of the
      Registrant is found in Part I of this report.





IEC
      has
      adopted a Code of Business Conduct and Ethics (the “Code”), which applies to all
      of its directors, officers (including IEC’s Chief Executive Officer, Chief
      Financial Officer, and other senior financial officers), and employees. The
      Code, a copy of which was filed as Exhibit 14 to IEC’s Current Report on Form
      8-K filed on September 1, 2004, may be viewed on IEC’s website, www.iec-electronics.com ,
      under
      its “Investor Relations – Corporate Governance” captions, and is available in
      print (free of charge) to any person upon request to Chief Financial Officer,
      IEC Electronics Corp., 105 Norton Street, Newark, NY 14513, telephone (315)
      331-7742. Any amendment to, or waiver of, a provision of the Code which applies
      to IEC’s Chief Executive Officer, Chief Financial Officer, or other senior
      financial officers and relates to the elements of a “code of ethics” as defined
      by the Securities and Exchange Commission will also be posted on the
      website.





ITEM
      11.
      EXECUTIVE COMPENSATION





The
      information required by this item is presented under the captions entitled
      "Compensation of Named Executive Officers and Directors” and “Election of
      Directors – Compensation Committee Interlocks and Insider Participation”
contained in the definitive proxy statement issued in connection with the 2009
      Annual Meeting of Stockholders and is incorporated in this report by reference
      thereto, except, however, the section entitled “Compensation Committee Report”
shall not be deemed to be “soliciting material” or to be filed with the
      Commission or subject to Regulation 14A or 14C, or to the liabilities of Section
      18 of the Exchange Act of 1934, as amended.





ITEM
      12.
      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS





The
      information required by this item is presented under the caption entitled
      "Security Ownership of Certain Beneficial Owners and Management" contained
      in
      the definitive proxy statement issued in connection with the 2009 Annual Meeting
      of Stockholders and is incorporated in this report by reference thereto.
      Information relating to Equity Compensation Plans is found in Item 5 of Part
      II
      of this report.





ITEM
      13.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE





The
      information required by this item is presented under the captions “Certain
      Relationships and Related Person Transactions” and “Election of Directors”
contained in the definitive proxy statement issued in connection with the 2009
      Annual Meeting of Stockholders and is incorporated in this report by reference
      thereto.





ITEM
      14.
      PRINCIPAL ACCOUNTANT FEES AND SERVICES





The
      information required by this item is presented under the caption "Independent
      Public Accountants” contained in the definitive proxy statement issued in
      connection with the 2009 Annual Meeting of Stockholders and is incorporated
      in
      this report by reference thereto.





20




**PART
      IV**




ITEM
      15.
      EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES





(a)
            The
                following documents are filed as part of this report and as response
                to
                Item 8:


Page(1)
              
              Consolidated
                  Financial Statements and Supplementary SchedulesReport
                  of Independent Registered Public Accounting Firm
              
              24Consolidated
                  Balance Sheets as of September 30, 2008 and 2007
              
              25Consolidated
                  Statements of Operations for the years ended September 30, 2008,
                  2007 and
                  2006
              
              26Consolidated
                  Statements of Comprehensive Income (Loss) and Shareholders' Equity
                  for the
                  years ended September 30, 2008, 2007 and 2006
              
              27Consolidated
                  Statements of Cash Flows for the years ended September 30, 2008,
                  2007 and
                  2006
              
              28Notes
                  to Consolidated Financial Statements
              
              29Selected
                  Quarterly Financial Data (unaudited)
              
              38
 All
        other
        schedules are either inapplicable or the information is included in the
        consolidated financial statements and, therefore, have been
        omitted.
  (2)
              
              
              Financial
                  Statement Schedules required to be filed by Item 8 of this Form
                  10-K:Valuation
                  of Qualifying Accounts
              
              38




(3)
      Exhibits




Exhibit
                No.
            
            Title2.1
            
            Agreement
                and Plan of Merger by and among IEC Electronics Corp., VUT Merger
                Corp.
                and Val-U-Tech Corp. dated as of May 23, 2008 (incorporated by reference
                to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
                the
                quarter ended June 27, 2008)3.1
            
            Amended
                and Restated Certificate of Incorporation of DFT Holdings Corp.
                (incorporated by reference to Exhibit 3.1 to the Company's Registration
                Statement on Form S-1, Registration No. 33-56498)3.2
            
            Amended
                Bylaws of IEC Electronics Corp. (incorporated by reference to Exhibit
                3.2
                to the Company's Annual Report on Form 10-K for the year ended September
                30, 2002).3.3
            
            Agreement
                and Plan of Merger of IEC Electronics into DFT Holdings Corp.
                (incorporated by reference to Exhibit 3.3 to the Company's Registration
                Statement on Form S-1, Registration No. 33-56498)3.4
            
            Certificate
                of Merger of IEC Electronics Corp. into DFT Holdings Corp. - New
                York.
                (incorporated by reference to Exhibit 3.4 to the Company's Registration
                Statement on Form S-1, Registration No. 33-56498)3.5
            
            Certificate
                of Ownership and Merger merging IEC Electronics Corp. into DFT Holdings
                Corp. - Delaware. (incorporated by reference to Exhibit 3.5 to the
                Company's Registration Statement on Form S-1, Registration No.
                33-56498)3.6
            
            Certificate
                of Merger of IEC Acquisition Corp. into IEC Electronics Corp.
                (incorporated by reference to Exhibit 3.6 to the Company’s Registration
                Statement on Form S-1, Registration No. 33-56498)3.7
            
            Certificate
                of Amendment of Certificate of Incorporation of IEC Electronics Corp.
                filed with the Secretary of State of the State of Delaware on Feb.
                26,
                1998 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly
                Report on Form 10-Q for the Quarter ended March 27,
                1998)3.8
            
            Certificate
                of Designations of the Series A Preferred Stock of IEC Electronics
                Corp.
                filed with the Secretary of State of the State of Delaware on June
                3,
                1998. (incorporated by reference to Exhibit 3.8 of the Company's
                Annual
                Report on Form 10-K for the year ended September 30, 1998)4.1
            
            Specimen
                of Certificate for Common Stock. (incorporated by reference to Exhibit
                4.1
                to the Company's Registration Statement on Form S-1, Registration
                No.
                33-56498)10.1*
            
            Form
                of Indemnity Agreement between the Company and its directors and
                executive
                officers. (incorporated by reference to Exhibit 10.2 to the Company's
                Quarterly Report on Form 10-Q for the quarter ended July 2,
                1993)





21





10.2*
            
            IEC
                Electronics Corp. 1993 Stock Option Plan, as amended (Incorporated
                by
                reference to Exhibit 10.9 to the Company's Annual Report on Form
                10-K for
                the year ended September 30, 1998)10.3*
            
            Form
                of Incentive Stock Option Agreement (Incorporated by reference to
                Exhibit
                4.2 to the Company's Registration Statement on Form S-8, Registration
                No.
                33-79360)10.4*
            
            Form
                of Non-Statutory Stock Option Agreement (Incorporated by reference
                to
                Exhibit 4.3 to the Company's Registration Statement on Form S-8,
                Registration No. 33-79360)10.5*
            
            Form
                of Non-Employee Director Stock Option Agreement (incorporated by
                reference
                to Exhibit 4.4 to the Company's Registration Statement on Form S-8,
                Registration No. 33-79360)10.6*
            
            IEC
                Electronics Corp. 2001 Stock Option and Incentive Plan, as amended
                on
                August 22, 2007 (incorporated by reference to Appendix A to the Company's
                Proxy Statement for its 2008 Annual Meeting of
                Stockholders).10.7
            
            Credit
                Facility Agreement dated as of May 30, 2008 by and among IEC Electronics
                Corp. and Manufacturers and Traders Trust Company (incorporated by
                reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q
                for the quarter ended June 27, 2008)10.8
            
            First
                Amendment to Credit Facility Agreement made July 29, 2008 to be effective
                as of May 30, 2008 between IEC Electronics Corp. and Manufacturers
                and
                Traders Trust Company10.9*
            
            Form
                of Challenge Award Option Agreement granted to senior management
                in Fiscal
                2005 (Incorporated by reference to Exhibit 10.14 to the Company’s Annual
                Report on Form 10-K for the year ended September 30, 2005)10.10*
            
            Form
              of First Amendment to Challenge Award Option Agreement dated as of
              September 29, 2006 (incorporated by reference to Exhibit 10.16 to the
              Company's Annual Report on Form 10-K for the year ended September 30,
              2007)10.11*
            
            Form
                of Second Amendment to Challenge Award Option Agreement dated as
                of
                January 23, 200810.12*
            
            Form
                of Sales Restriction Agreement between IEC Electronics Corp. and
                certain
                option holders, dated as of August 24,2005 (incorporated by reference
                to
                Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year
                ended September 30, 2005)10.13*
            
            Option
                Award Agreement between the Company and W. Barry Gilbert dated as
                of
                August 12, 200310.14*
            
            First
                Amendment to Option Award Agreement between the Company and W. Barry
                Gilbert dated as of August 15, 200610.15*
            
            Restricted
                Stock Award Agreement between the Company and Jeffrey T. Schlarbaum
                dated
                as of May 14, 200810.16*
            
            Restricted
                Stock Award Agreement between the Company and Donald S. Doody dated
                as of
                May 14, 200810.17*
            
            Separation
                Agreement between the Company and Brian Davis dated February 15,
                200810.18*
            
            Independent
                Consulting Agreement between the Company and Brian Davis dated February
                15, 200810.19*
            
            2008
                Management Incentive Plan14
            
            Code
                of Business Conduct and Ethics (incorporated by reference to Exhibit
                14 to
                the Company’s Current Report on Form 8-K filed on September 1,
                2004)21.1
            
            Subsidiaries
                of IEC Electronics Corp.23.1
            
            Consent
                of Rotenberg & Co., LLP31.1
            
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2
            
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                Section
                906 of the Sarbanes-Oxley Act of
                2002





*Management
      contract or compensatory plan or arrangement




22





SIGNATURES




Pursuant
      to the requirement of Section 13 or 15(d) of the Securities and Exchange Act
      of
      1934, the Registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.





Dated:
      November 13, 2008.





IEC
                Electronics Corp.By:/s/
                W. Barry GilbertW.
                Barry GilbertChief
                Executive Officer and Chairman of the
                Board





Pursuant
      to the requirements of the Securities Exchange Act of 1934,this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.




Signature
            
            Title
            
            Date/s/W.
                Barry Gilbert
            
            Chief
                Executive Officer and Chairman of the Board
            
            November
                13, 2008(W.
                Barry Gilbert)/s/Michael
                R. Schlehr
            
            Vice
                President and Chief Financial Officer
            
            November
                13, 2008(Michael
                R. Schlehr)/s/Carl
                E. Sassano
            
            Director
            
            November
                13, 2008(Carl
                E. Sassano)/s/Jerold
                L. Zimmerman
            
            Director
            
            November
                13, 2008(Jerold
                L. Zimmerman)/s/Eben
                S. Moulton
            
            Director
            
            November
                13, 2008(Eben
                S. Moulton)/s/Justin
                L. Vigdor
            
            Director
            
            November
                13, 2008(Justin
                L. Vigdor)/s/James
                C. Rowe
            
            Director
            
            November
                13, 2008(James
                C. Rowe)





23







24





IEC
      ELECTRONICS CORP. AND ITS SUBSIDIARIES


CONSOLIDATED
      BALANCE SHEETS


SEPTEMBER
      30, 2008 AND 2007


(in
      thousands)





ASSETS




2008
            
            2007CURRENT
                ASSETS:Cash
            
            $
            -
            
            $
            -Accounts
                receivable (net of allowance for doubtful
            
            
            10,345
            
            
            6,185Accounts
                of $145 and $100 respectively)Inventories
            
            
            5,566
            
            
            3,326Deferred
                income taxes
            
            
            1,908
            
            
            640Other
                current assets
            
            
            61
            
            
            75Total
                Current Assets
            
            
            17,880
            
            
            10,226FIXED
                ASSETS:Land
                and land improvements
            
            
            742
            
            
            704Building
                and improvements
            
            
            4,368
            
            
            4,134Machinery
                and equipment
            
            
            8,567
            
            
            22,626Furniture
                and fixtures
            
            
            4,083
            
            
            4,262Sub-Total
                Gross Property
            
            
            17,760
            
            
            31,726Less
                Accumulated Depreciation
            
            
            (16,907
            )
            
            (30,123
            )Net
                Fixed Assets
            
            
            853
            
            
            1,603NON-CURRENT
                ASSETS:Deferred
                income taxes
            
            
            14,727
            
            
            -Other
                Non Current Assets
            
            
            60
            
            
            16Total
                Non-Current Assets
            
            
            14,787
            
            
            16Total
                Assets
            
            $
            33,520
            
            $
            11,845





LIABILITIES
      AND SHAREHOLDERS' EQUITY





2008
            
            2007CURRENT
                LIABILITIES:Short
                term borrowings
            
            $
            1,098
            
            $
            1,325Accounts
                payable
            
            
            6,125
            
            
            4,937Accrued
                payroll and related expenses
            
            
            808
            
            
            628Other
                accrued expenses
            
            
            603
            
            
            366Total
                current liabilities
            
            
            8,634
            
            
            7,256Long
                term debt
            
            
            8,910
            
            
            426Total
                Liabilities
            
            
            17,544
            
            
            7,682SHAREHOLDERS'
                EQUITY:Preferred
                stock, $.01 par value, Authorized – 500,000 shares; Issued and
                outstanding – none
            
            
            –
            
            
            –Common
                stock, $.01 par value, Authorized - 50,000,000 shares; Issued - 9,326,582
                and 8,670,030 shares
            
            
            93
            
            
            87Treasury
                Shares at Cost 412,873 and 412,873 shares
            
            
            (223
            )
            
            (223
            )Additional
                paid-in capital
            
            
            40,124
            
            
            38,794Accumulated
                deficit
            
            
            (24,018
            )
            
            (34,495
            )Total
                shareholders' equity
            
            
            15,976
            
            
            4,163Total
                liabilities and shareholders’ equity
            
            $
            33,520
            
            $
            11,845





The
      accompanying notes are an integral part of these financial
      statements.




25





IEC
      ELECTRONICS CORP. AND ITS SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF OPERATIONS


FOR
      THE
      YEARS ENDED SEPTEMBER 30, 2008, 2007 AND 2006


(in
      thousands, except per share and share data)




2008
            
            2007
            
            2006Net
                sales
            
            $
            51,092
            
            $
            40,914
            
            $
            22,620Cost
                of sales
            
            
            44,875
            
            
            37,037
            
            
            19,867Gross
                profit
            
            
            6,217
            
            
            3,877
            
            
            2,753Selling
                and administrative expenses
            
            
            3,825
            
            
            2,892
            
            
            2,155Operating
                income
            
            
            2,392
            
            
            985
            
            
            598Interest
                and financing expense
            
            
            452
            
            
            440
            
            
            378Other
                expense (footnote #9)
            
            
            306
            
            
            42
            
            
            5Net
                income before income taxes
            
            
            1,634
            
            
            503
            
            
            215(Benefit
                from) income taxes (footnote #3)
            
            
            (8,843
            )
            
            (372
            )
            
            -Net
                income
            
            $
            10,477
            
            $
            875
            
            $
            215Net
                income per common and common equivalent share:Basic
                Income available to common shareholders
            
            $
            1.22
            
            $
            0.11
            
            $
            0.03Diluted
                Income available to common shareholders
            
            $
            1.12
            
            $
            0.10
            
            $
            0.03Weighted
                average number of common and common equivalent shares
                outstanding:Basic
            
            
            8,553,635
            
            
            8,114,491
            
            
            7,973,199Diluted
            
            
            9,337,097
            
            
            8,895,819
            
            
            8,275,961




The
      accompanying notes are an integral part of these financial
      statements.




26


IEC
      ELECTRONICS CORP. AND ITS SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF COMPREHENSIVE INCOME AND SHAREHOLDERS' EQUITY


FOR
      THE
      YEARS ENDED SEPTEMBER 30, 2008, 2007 AND 2006


(in
      thousands)




Additional
            
            Retained
            
            
            
            TotalComprehensive
            
            Common
            
            Paid-In
            
            Earnings
            
            Treasury
            
            ShareholdersIncome
            
            Stock
            
            Capital
            
            (Deficit)
            
            Stock
            
            EquityBALANCE,September
                30, 2005
            
            
            
            
            $
            83
            
            $
            38,533
            
            $
            (35,585
            )
            $
            (11
            )
            $
            3,020Shares
                issued and expensed Under Directors and Employee Stock
                Plan
            
            
            
            
            $
            1
            
            $
            68
            
            
            -
            
            
            -
            
            $
            69Net
                Income
            
            $
            215
            
            
            -
            
            
            -
            
            $
            215
            
            
            -
            
            $
            215Purchase
                of Treasury Stock
            
            
            
            
            
            -
            
            
            -
            
            
            -
            
            
            (212
            )
            $
            (212
            )Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            215BALANCE,September
                30, 2006
            
            
            
            
            $
            84
            
            $
            38,601
            
            $
            (35,370
            )
            $
            (223
            )
            $
            3,092Shares
                issued and expensed Under Directors and Employee Stock
                Plan
            
            
            
            
            $
            3
            
            $
            193
            
            
            -
            
            
            -
            
            $
            196Net
                Income
            
            $
            875
            
            
            -
            
            
            -
            
            $
            875
            
            
            -
            
            $
            875Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            875BALANCE,September
                30, 2007
            
            
            
            
            $
            87
            
            $
            38,794
            
            $
            (34,495
            )
            $
            (223
            )
            $
            4,163Shares
                issued and expensed Under Directors and Employee Stock
                Plan
            
            
            
            
            $
            1
            
            $
            285
            
            
            -
            
            
            -
            
            $
            286Shares
                Issued for Val-U-Tech Acquisition
            
            
            
            
            $
            5
            
            $
            1,045
            
            
            -
            
            
            -
            
            $
            1,050Net
                Income
            
            $
            10,477
            
            
            -
            
            
            -
            
            $
            10,477
            
            
            -
            
            $
            10,477Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            10,477BALANCE,September
                30, 2008
            
            
            
            
            $
            93
            
            $
            40,124
            
            $
            (24,018
            )
            $
            (223
            )
            $
            15,976





The
      accompanying notes are an integral part of these financial
      statements.


27


IEC
      ELECTRONICS CORP. AND ITS SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


FOR
      THE
      YEARS ENDED SEPTEMBER 30, 2008, 2007 AND 2006


(in
      thousands)





2008
            
            2007
            
            2006CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            10,477
            
            $
            875
            
            $
            215Non-cash
                adjustments:Compensation
                Expense - Stock Options
            
            
            195
            
            
            80
            
            
            27Depreciation
                and amortization
            
            
            378
            
            
            410
            
            
            676(Gain)
                loss on sale of fixed assets
            
            
            1
            
            
            17
            
            
            5Issuance
                of directors fees in stock
            
            
            35
            
            
            41
            
            
            27Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (2,497
            )
            
            (1,244
            )
            
            (2,597
            )Inventories
            
            
            (595
            )
            
            1,788
            
            
            (4,484
            )Deferred
                income taxes
            
            
            (9,014
            )
            
            (390
            )
            
            -Other
                assets
            
            
            (23
            )
            
            62
            
            
            155Accounts
                payable
            
            
            761
            
            
            1,084
            
            
            2,935Accrued
                expenses
            
            
            333
            
            
            385
            
            
            (54
            )Net
                cash flows from operating activities
            
            
            51
            
            
            3,108
            
            
            (3,095
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Proceeds
                from sale of property
            
            
            2,002
            
            
            17
            
            
            11Cash
                Paid for Acquisition of Subsidiary
            
            
            (5,500
            )
            
            -
            
            
            -Cash
                Received upon Acquisition of Subsidiary
            
            
            544
            
            
            -
            
            
            -Purchases
                of property, plant and equipment
            
            
            (1,434
            )
            
            (787
            )
            
            (407
            )Capitalized
                acquisition costs paid
            
            
            (54
            )
            
            -
            
            
            -Net
                cash flows from investing activities
            
            
            (4,442
            )
            
            (770
            )
            
            (396
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Net
                Borrowings (Repayments) on Revolver
            
            
            3,964
            
            
            (2,558
            )
            
            3,573Repayments
                on Term Debt
            
            
            (1,501
            )
            
            (305
            )
            
            (346
            )Borrowings
                from Term Debt
            
            
            1,903
            
            
            450
            
            
            -Purchase
                of Treasury Stock
            
            
            -
            
            
            -
            
            
            (212
            )Proceeds
                from exercise of stock options
            
            
            89
            
            
            75
            
            
            15Capitalized
                financing costs
            
            
            (64
            )
            
            -
            
            
            -Net
                cash flows from financing activities
            
            
            4,391
            
            
            (2,338
            )
            
            3,030Change
                in cash and cash equivalents
            
            
            -
            
            
            -
            
            
            (461
            )Cash
                and cash equivalents, beginning of year
            
            
            -
            
            
            -
            
            
            461Cash
                and cash equivalents, end of year
            
            $
            -
            
            $
            -
            
            $
            -SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:Cash
                paid during the year for:Interest
            
            $
            452
            
            $
            427
            
            $
            340Income
                taxes, net of refunds received
            
            
            3
            
            
            3
            
            
            -SUPPLEMENTAL
                DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Val-U-Tech
                Assets and Liabilities acquired (footnote #3):Net
                Accounts Receivable
            
            $
            1,663
            
            $
            -
            
            $
            -Net
                Inventories
            
            
            1,645
            
            
            -
            
            
            -Net
                Fixed Assets
            
            
            175
            
            
            -
            
            
            -Deferred
                Tax Assets
            
            
            6,981
            
            
            -
            
            
            -Accounts
                Payable
            
            
            428
            
            
            -
            
            
            -Accrued
                Expenses
            
            
            83
            
            
            -
            
            
            -




The
      accompanying notes are an integral part of these financial
      statements.


28




IEC
      ELECTRONICS CORP. AND ITS SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
      30, 2008, 2007 AND 2006





1.
      BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:





Business





IEC
      Electronics Corp.,("IEC", "We", "Our", the “Company”), is a premier provider of
      electronic manufacturing services to advanced technology companies. We
      specialize in the custom manufacture of high reliability, complex circuit cards,
      system level assemblies and a wide array of custom cable/wire harness
      assemblies. We excel where quality is paramount and where low to medium volume,
      high mix production is the norm. We utilize state-of-the art, automated
      manufacturing and reliability testing equipment and have created a “high
      intensity response culture” to react to our customer’s ever-changing needs. As a
      true extension of our customer’s operation, we have applied industry leading Six
      Sigma and Lean Manufacturing principles to eliminate waste and lower our
      customer’s total cost of ownership. While many EMS services are viewed as a
      commodity, we have truly set ourselves apart through an uncommon mix of unique
      features including:




§
            A
                world class Technology Center that combines a dedicated prototype
                manufacturing center with an on-site Materials Analysis Lab (headed
                by a
                staff PhD) for the seamless introduction of complex electronics




§
            A
                sophisticated Lean/Sigma continuous improvement program supported
                by four
                certified Six Sigma Blackbelts delivering best-in-class
                results




§
            Industry-leading
                Web Portal providing real-time access to a wide array of critical
                customer
                data




§
            In-house
                custom functional test development to support complex system-level
                assembly, test, troubleshoot and end-order fulfillment




Cash
      and
      Cash Equivalents





The
      Company’s cash received is applied against its revolving line of credit on a
      daily basis reducing interest expense. Cash and cash equivalents include highly
      liquid investments with original maturities of three months or less. The
      Company's cash and cash equivalents are held and managed by institutions which
      follow the Company's investment policy. The fair value of the Company's
      financial instruments approximates carrying amounts due to the relatively short
      maturities and variable interest rates of the instruments, which approximate
      current market interest rates.





Allowance
      for Doubtful Accounts





The
      Company establishes an allowance for uncollectable trade accounts receivable
      based on the age of outstanding invoices and management’s evaluation of
      collectability of outstanding balances.





Inventory
      Valuation





Inventories
      are stated at the lower of weighted average cost (first-in, first-out) or
      market. The Company regularly assesses slow-moving, excess and obsolete
      inventory and maintains a balance sheet reserve against these risks.





Property,
      Plant and Equipment





Property,
      plant, and equipment are stated at cost and are depreciated over various
      estimated useful lives using the straight-line method.




Maintenance
      and repairs are charged to expense as incurred; renewals and improvements are
      capitalized. At the time of retirement or other disposition of property, plant,
      and equipment, the cost and accumulated depreciation are removed from the
      accounts and any gain or loss is reflected in other income.





Depreciation
      and amortization was $0.4 million, $0.4 million, and $0.7 million for the years
      ended September 30, 2008, 2007 and 2006, respectively.




29




The
      principal depreciation and amortization lives used are as follows:




Description
            
            Estimated
                Useful LivesLand
                improvements
            
            10
                yearsBuildings
                and improvements
            
            5
                to 40 yearsMachinery
                and equipment
            
            3
                to 5 yearsFurniture
                and fixtures
            
            3
                to 7 years





Long-Lived
      Assets





The
      Company evaluates its long-lived assets for financial impairment on a regular
      basis in accordance with Statement of Financial Accounting Standards No. 144,
      "Accounting for the Impairment or Disposal of Long-Lived Assets." IEC evaluates
      the recoverability of long-lived assets not held for sale by measuring the
      carrying amount of the assets against the sum of the undiscounted cash flows
      expected to result from the use and eventual disposition of the asset (asset
      group).





Fair
      Value of Financial Instruments





Financial
      instruments consist of cash and cash equivalents, accounts receivable and
      payable, accrued liabilities, and debt. The carrying amount of cash and cash
      equivalents, accounts receivable, accounts payable and accrued liabilities
      approximate fair value. The fair value of the Company's debt is estimated based
      upon similar market rate debt issues.





Revenue
      Recognition





The
      Company’s net revenue is derived from the sale of electronic products built to
      customer specifications. The Company also derives revenue from design services
      and repair work. Revenue from sales is generally recognized, net of estimated
      product return costs, when goods are shipped; title and risk of ownership have
      passed; the price to the buyer is fixed or determinable; and recovery is
      reasonable assured. Service related revenues are recognized upon completion
      of
      the services. The Company assumes no significant obligations after product
      shipment.





Stock
      Based Compensation





The
      Company accounts for stock based compensation under SFAS No. 123(R),
      Share-Based Payment. SFAS No. 123(R) requires the measurement of the cost
      of employee services received in exchange for an award of equity instruments
      based on the grant-date fair value of the award. The cost will be recognized
      over the period during which an employee is required to provide service in
      exchange for the award. Stock-based compensation expense for all stock-based
      compensation awards granted on or after October 1, 2005 is based on the
      grant-date fair value estimated in accordance with SFAS No. 123(R). The
      Company recognizes these compensation costs ratably over the requisite service
      period of the award. SFAS No. 123(R) also requires an entity to calculate
      the pool of excess tax benefits available to absorb tax deficiencies recognized
      subsequent to adoption of SFAS No. 123(R) (“APIC pool”). In November 2005,
      the FASB issued Staff Position (“FSP”) No. 123(R)-3, Transition Election
      Related to Accounting for the Tax Effects of Share-Based Payment Awards, which
      provides entities an elective alternative simplified method for computing their
      APIC pool upon adoption of SFAS No. 123(R). The Company has evaluated its
      APIC pool and has determined that it was immaterial as of October 1, 2005.
      SFAS
      No.123(R) also amends SFAS No. 95, Statement of Cash Flows, to require that
      excess tax benefits that had been reflected as operating cash flows be reflected
      as financing cash flows. Prior to the adoption of SFAS No.123(R), the Company
      accounted for stock-based compensation cost using the intrinsic value method
      of
      accounting prescribed by APB No. 25, and had adopted the disclosure-only
      provisions of SFAS No. 123, as amended by SFAS No. 148, Accounting for
      Stock-Based Compensation-Transition Disclosure. See Note #6 for additional
      information on stock-based compensation.





Income
      Tax/Deferred Tax Policy





We
      account for income taxes in accordance with the provisions of SFAS No. 109,
      Accounting for Income Taxes (“SFAS 109”), which require recognition of deferred
      tax assets and liabilities for the expected future tax consequences of events
      that have been included in the financial statements or tax returns. Under this
      method, deferred tax assets and liabilities are determined based on differing
      treatment of items for financial reporting and income tax reporting purposes.
      The deferred tax balances are adjusted to reflect tax rates by tax jurisdiction,
      based on currently enacted tax laws, which will be in effect in the years in
      which the temporary differences are expected to reverse. We have provided
      deferred income tax benefits on net operating loss carry-forwards to the extent
      we believe we will be able to utilize them in future tax filings.





Earnings
      Per Share





Net
      income (loss) per common share is computed in accordance with SFAS No. 128,
      "Earnings Per Share". Basic earnings per common share are calculated by dividing
      income available to common shareholders by the weighted-average number of common
      shares outstanding for each period. Diluted earnings per common share are
      calculated by adjusting the weighted-average shares outstanding assuming
      conversion of all potentially dilutive stock options, warrants and convertible
      securities.


30




Use
      of
      Estimates





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amount o f
      assets
      and liabilities, the disclosure of contingent assets and liabilities at the
      date
      of the financial statements, and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.





Consolidation





The
      consolidated financial statements include the accounts of IEC and its wholly
      owned subsidiary, Val-U-Tech, from May 31, 2008. All significant inter-company
      transactions and accounts have been eliminated.





RECENTLY
      ISSUED ACCOUNTING STANDARDS




In
      June 2006, the Emerging Issues Task Force (“EITF”) reached a consensus on
      EITF Issue No. 06-4 Accounting for Deferred Compensation and Postretirement
      Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements (“EITF
      06-4”), which requires the Company to recognize a postretirement liability for
      the discounted future benefit obligation that the Company will have to pay
      upon
      the death of the underlying insured employee. EITF 06-4 is effective for
      financial statements issued for fiscal years beginning after December 15, 2007.
      As such, the Company is required to adopt these provisions beginning with the
      fiscal year ending September 30, 2009. The Company is currently evaluating
      the
      adoption of this pronouncement.





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 157, "Fair Value
      Measurements”. SFAS 157 defines fair value, establishes a framework for
      measuring fair value, and expands disclosures about fair value measurements.
      SFAS 157 is effective as of the beginning of the first fiscal year that begins
      after November 15, 2007. As such, the Company is required to adopt these
      provisions at the beginning of the fiscal year ending September 30, 2009. The
      Company is currently evaluating the impact of SFAS 157 but does not expect
      it to
      have a material effect on its consolidated financial statements.




In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 159, "The Fair Value
      Option for Financial Assets and Financial Liabilities, including an amendment
      of
      FASB Statement No. 115”. SFAS 159 permits entities to choose to measure many
      financial instruments and certain other items at fair value at specified
      election dates. SFAS 159 is effective as of the beginning of an entity’s first
      fiscal year that begins after November 15, 2007. As such, the Company is
      required to adopt these provisions at the beginning of the fiscal year ending
      September 30, 2009. The Company is currently evaluating the impact of SFAS
      159
      but does not expect it to have a material effect on its consolidated financial
      statements.





In
      December 2007, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards (“SFAS”) No. 141(R), “Business
      Combinations”. SFAS 141(R) establishes principles and requirements for how the
      acquirer recognizes and measures in its financial statements the identifiable
      assets acquired, the liabilities assumed, any non-controlling interest in the
      acquiree, recognizes and measures the goodwill acquired in the business
      combination or a gain from a bargain purchase, and determines what information
      to disclose to enable users of the financial statements to evaluate the nature
      and financial effects of the business combination. SFAS 141(R) is effective
      for
      fiscal years, and interim periods within those fiscal years, beginning on or
      after December 15, 2008. As such, the Company is required to adopt these
      provisions at the beginning of the fiscal year ended September 30, 2010. The
      Company is currently evaluating the impact of SFAS 141(R) but does not expect
      it
      to have a material effect on its consolidated financial statements.





In
      December 2007, the SEC issued Staff Accounting Bulletin No. 110 (“SAB
      110”). SAB 110 permits companies to continue to use the simplified method, under
      certain circumstances, in estimating the expected term of “plain vanilla”
options beyond December 31, 2007. SAB 110 updates guidance provided in SAB
      107
      that previously stated that the Staff would not expect a company to use the
      simplified method for share option grants after December 31, 2007. The
      Company is currently evaluating the impact of SAB 110 but does not expect it
      to
      have a material effect on its consolidated financial statements.





In
      December 2007, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standard (“SFAS”) No. 160, "Non-controlling Interests in
      Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160
      establishes accounting and reporting standards for the non-controlling interest
      in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is
      effective for fiscal years, and interim periods within those fiscal years,
      beginning on or after December 15, 2008. As such, the Company is required to
      adopt these provisions at the beginning of the fiscal year ended September
      30,
      2010. The Company is currently evaluating the impact of SFAS 160 but does not
      expect it to have a material effect on its consolidated financial
      statements.


31





2.
      INVENTORIES





Inventories
      are stated at the lower of weighted average cost (first-in, first-out) or
      market. The major classifications of inventories are as follows at period end
      (in thousands):





2008
            
            2007Raw
                Materials
            
            $
            3,111
            
            $
            1,811Work-in-process
            
            
            1,743
            
            
            1,427Finished
                goods
            
            
            712
            
            
            88$
            5,566
            
            $
            3,326





3.
      ACQUISITION





On
      May
      30, 2008, the Company acquired all the stock of Val-U-Tech Corp. (“Val-U-Tech”)
      The acquired business enables IEC to enter the wire and cable harness
      interconnect business. The acquisition substantially enhances the Company’s
      sales mix. Val-U-Tech’s interconnect expertise, supported by a solid management
      team, supplements the Company’s core market sectors in Military/Aerospace and
      Industrial marketplace.





The
      Val-U-Tech operation manufactures printed circuit assemblies and cable harnesses
      for customers in the Military, Industrial and Medical markets. The Company
      believes there will be continued growth in these markets along with the ability
      to support IEC’s customer base.





The
      purchase price for the Val-U-Tech acquisition was $10.4 million, which includes
      a post closing working capital adjustment of approximately $.4 million, funded
      by senior bank debt, seller notes, sales leaseback of some of IEC’s fixed
      assets, and the issuance of 500,000 shares of common stock to the sellers.
      In
      addition, the Company assumed liabilities of approximately $.5 million,
      primarily trade accounts payable. The purchase price may be increased or
      decreased depending upon the gross revenues of Val-U-Tech for its calendar
      year
      ending December 31, 2008 and depending upon the sales by Val-U-Tech to its
      largest customer in calendar year 2009. In addition, the Seller Notes are
      subject to a final working capital reconciliation.





Under
      the
      purchase method of accounting, the initial purchase price was allocated to
      Val-U-Tech’s net tangible and intangible assets based upon their estimated fair
      values as of the date of the acquisition. The purchase price allocation as
      of
      May 30, 2008 is as follows:





(Dollars
                in thousands)
            
            At May 30, 2008Current
                Assets
            
            $
            3,851Property
                and Equipment
            
            
            175Deferred
                Tax Asset
            
            
            6,981Total
                assets acquired
            
            
            11,007Current
                Liabilities
            
            $
            511Net
                assets acquired
            
            $
            10,496Cash
                paid to Sellers
            
            $
            5,500Stock
                Issued to sellers [500,000 @ $2.10]
            
            
            1,050Seller
                Notes
            
            
            3,892Capitalized
                acquisition costs
            
            
            54Net
                assets acquired
            
            $
            10,496




The
      following table represents IEC’s unaudited proforma consolidated results of
      operations for fiscal 2008 and 2007 as if the acquisition of Val-U-Tech had
      occurred at the beginning of the fiscal year. Such results have been prepared
      by
      adjusting the historical IEC results to include Val-U-Tech results of operations
      and incremental interest and other expenses related to the acquisition debt.
      The
      proforma results do not include any cost savings or additional sales that may
      result from the combination of IEC and Val-U-Tech operations. The proforma
      results may not necessarily reflect the consolidated operations that would
      have
      existed had the acquisition been completed at the beginning of such periods
      nor
      are they necessary indicative of future results.


32





(Dollars
      in thousands, except per-share amounts)





Fiscal Year EndedSeptember 30, 2008
            
            September 30, 2007Net
                Sales
            
            $
            60,561
            
            $
            51,937Net
                Earnings Before Tax
            
            
            2,455
            
            
            1,531Net
                Earnings, inclusive of
            
            $
            11,298
            
            $
            1,903Deferred
                tax benefitBasic
                earnings per share
            
            $
            1.28
            
            $
            0.22Diluted
                earnings per share
            
            $
            1.18
            
            $
            0.20





Weighted
      average number of common and common equivalent shares outstanding (in
      thousands):





Basic
            
            
            8,822
                *
            
            
            8,614
                *Diluted
            
            
            9,579
                *
            
            
            9,396
                *





*
      includes 500 incremental shares of common stock provided to sellers





Effective
      October 1, 2008, the Val-U-Tech subsidiary’s fiscal year will be the twelve
      month period beginning on October 1 and ending on September 30, consistent
      with
      IEC.




4.
      CREDIT
      FACILITIES:





Debt
      consists of the following at September 30 (in thousands):





2008
            
            2007Short
                Term Borrowings
            
            $
            1,098
            
            $
            1,325Long
                Term Debt
            
            
            8,910
            
            
            426$
            10,008
            
            $
            1,751





The
      Company entered into a $14.2 million new senior secured loan agreement (Credit
      Agreement) and Sale Leaseback agreement with Manufacturers and Traders Trust
      Company (M&T Bank) on May 30, 2008. The following is a summary of the credit
      and sale leaseback agreements:





§
            A
                revolving credit facility up to $9.0 million, available for direct
                borrowings. The facility is based on a borrowing base formula equal
                to the
                sum of 85% of eligible receivables and 35% of eligible inventory.
                As of
                September 30, 2008, outstanding loans under the revolving credit
                facility
                were $5.0 million. The credit facility matures on May 30, 2013. Interest
                on the revolver is either prime or a stated rate over LIBOR, whichever
                is
                lower based on certain ratios. On September 30, 2008 the interest
                rate on
                our revolving line balance was 5.0%. During the 4th quarter of fiscal
                2008
                we determined that the committed revolving credit facility with our
                senior
                lender would more accurately be classified as a long term
                debt.




§
            A
                $1.7 million term loan amortized equally over 60 months beginning
                July
                2008. IEC’s interest rate is fixed at 6.7%. The outstanding balance at
                September 30, 2008 was $1.1 million. At September 30, 2007, the balance
                of
                our outstanding term loans with our previous senior lender was $0.7
                million.





§
            An
                available but currently unused $1.5 million equipment line of credit.
                The
                capital credit facility is amortized equally over 60 months and matures
                on
                May 30, 2013. Interest on the equipment line is either prime or a
                stated
                rate over LIBOR, whichever is lower based on certain ratios at the
                time of
                borrowing. As of September 30, 2008 there were no borrowings against
                this
                line.





§
            A
                $2.0 million Sale Leaseback of the Company’s fixed assets amortized
                equally over 60 months beginning June 27, 2008. Annual payments are
                fixed
                and are $388,800 per year with a total for the five years of $1.9
                million.
                Assets sold had a cost of $15.6 million inclusive of $1.2 million
                of
                assets purchased during the nine months ended June 27, 2008, and
                an
                accumulated depreciation of $13.6 million. A minimal loss will be
                amortized over the five year period of the lease. At September 30,
                2008
                our remaining unpaid balance for the lease was $1.8
                million.





§
            All
                loans and the Sale-Leaseback are secured by a security interest in
                the
                assets of the Company and Val-U-Tech; a pledge of all the Company’s equity
                interest in Val-U-Tech, a negative pledge on the Company’s real property
                and a guaranty by Val-U-Tech.


33





In
      connection with the acquisition of Val-U-Tech and the payment of the purchase
      price to the sellers (see Note #3), a portion of the purchase price was
      paid in the form of promissory notes (the "Seller Notes") in the aggregate
      principal amount of $3.8 million with interest at the rate of 4% per
      annum.  Payments of principal and interest will be made in 20 equal
      quarterly installments of approximately $211,000 beginning September 1, 2008.
      The Seller Notes are subject to a final reconciliation, and may be increased
      or
      decreased depending upon the gross revenues of Val-U-Tech for its calendar
      year
      ending December 31, 2008 and depending upon the sales by Val-U-Tech to its
      largest customer in calendar year 2009.  Each Seller Note is subordinated
      to the indebtedness of the Company under the Credit Agreement. In addition,
      the
      Seller Notes are subject to a final reconciliation of working
      capital.





The
      Company’s financing agreements contain various affirmative and negative
      covenants concerning the ratio of “EBITDARS” (Earnings Before Interest, Taxes,
      Depreciation, Amortization, Rent Expense under the Sale Leaseback and Stock
      Option Expense) to total debt and to fixed charges. These are calculated on
      a
      twelve month rolling basis. The Company must also maintain a minimum EBITDARS
      level of $350,000 per individual quarter. The Company was compliant with these
      covenants as of September 30, 2008. The table below provides details on the
      Company’s performance relative to each of the three covenants as of September
      30, 2008:





Covenant
            
            Requirement
            
            Actual Performance▪
            
            Minimum
              quarterly EBITDARS
            
            ≥   $
            350,000
            
            $
            1,180,000▪
            
            Fixed
              Charge Coverage
            
            ≥
            1.1x
            
            
            4.1x▪
            
            Total
              Debt to EBITDARS
            
            <
            3.75x
            
            
            2.8x





At
      the
      closing of the New Credit Agreement a portion of the proceeds from the Revolving
      Credit and the Term Loan repaid all of the Company’s obligations to our prior
      senior lender.





On
      April
      3, 2008, the Company received an energy loan ("NYSERDA Loan") from M&T Bank
      in the principal amount of $203,306. The NYSERDA Loan is a low interest loan,
      subsidized by New York State, to facilitate energy conservation projects. The
      NYSERDA Loan is for a term of 5 years and has an effective
      interest rate of 2.08%. The maturity date is May 1, 2013. As amended, the
      NYSERDA Loan is subject to the same financial covenants
      as those contained in the Credit Agreement.





Annual
      maturities of debt (in thousands) for the five years following September 30,
      2008 are:





Year
                1
            
            Year
                2
            
            Year
                3
            
            Year
                4
            
            Year
                5$
            1,098
            
            $
            1,135
            
            $
            1,166
            
            $
            953
            
            $
            5,656
                *





*includes
      revolver of $4,992




5.
      INCOME
      TAXES:





The
      provision for (benefit from) income taxes in fiscal 2008, 2007 and 2006 is
      summarized as follows (in thousands):





2008
            
            2007
            
            2006CurrentFederal
            
            $
            38
            
            $
            15
            
            $
            -State/Other
            
            
            2
            
            
            3
            
            
            -Deferred
                Tax Expense (Benefit)Federal
            
            
            (8,617
            )
            
            (370
            )
            
            -State/Other
            
            
            (266
            )
            
            (
                20
            )
            
            -Provision
                for (Benefit from) Income taxes, net
            
            $
            (8,843
            )
            
            (372
            )
            
            -


34





The
      components of the deferred tax asset at September 30, 2008 are as follows (in
      thousands):





2008
            
            2007
            
            2006Net
                operating loss and AMT credit carryovers
            
            $
            15,598
            
            $
            15,848
            
            $
            15,874Accelerated
                depreciation
            
            
            596
            
            
            500
            
            
            495New
                York State investment tax credits
            
            
            3,312
            
            
            3,276
            
            
            3,254Inventories
            
            
            140
            
            
            95
            
            
            188Other
            
            
            301
            
            
            327
            
            
            38519,947
            
            
            20,046
            
            
            20,196Remaining
                Valuation allowance
            
            
            (3,312
            )
            
            (19,406
            )
            
            (19,946
            )$
            16,635*
            
            $
            640
            
            $
            250


*
      includes deferred tax assets acquired in Val-U-Tech acquisition





The
      Company has a net operating loss carryforward of $43.9 million (expiring in
      years through 2024). The Company has available approximately $5.0 million in
      New
      York State investment tax credits (expiring in years through 2017). FAS 109
      requires the company to establish an asset on the balance sheet to reflect
      the
      future value associated with the ability to utilize these losses and credits
      against future income tax obligations. During 2001 there was substantial doubt
      as to the company's viability as a going concern. The company was not certain
      about its ability to utilize its net operating losses and investment tax
      credits, so a full valuation allowance was established against the deferred
      tax
      asset.





Since
      2005 IEC has been aggressively working to rebuild its business and increase
      its
      level of earnings. Management is increasingly confident about its prospects
      for
      future growth and profit. The outlook for future profitability through the
      life
      of the NOL has been used as a basis for reversing the majority of the valuation
      allowance against the deferred tax asset. A valuation allowance of $3.3 million
      against deferred tax assets was kept due to the Company's probable inability
      to
      realize the tax benefits from New York State investment tax credits.  These
      credits fully expire in 2017 and cannot be used until the Company exhausts
      all
      of its NY State net operating loss carry forwards for state taxes.  Due to
      a low state tax rate, it is unlikely that the Company will use 100% of its
      state
      net operating losses before 2017. Going forward, management will continue to
      consider what portion of the deferred tax asset is more than likely than not
      to
      be realized, and the valuation allowance will be adjusted accordingly.




The
      differences between the effective tax rates and the statutory federal income
      tax
      rates for fiscal years 2008, 2007 and 2006 are summarized as
      follows:





2008
            
            2007
            
            2006Federal
                Tax at statutory rates
            
            
            34.0
            %
            
            34.0
            %
            
            34.0
            %State
                tax, net of Federal Benefit
            
            
            1.0
            
            
            5.0
            
            
            5.0Carryforwards
            
            
            -
            
            
            -
            
            
            -Valuation
                Allowance
            
            
            (576.2
            )
            
            (39.0
            )
            
            (39.0
            )(541.2
            )%
            
            -
            %
            
            -
            %





6.
      Stock
      Based Compensation




a.)Stock
      Option Plan





In
      February 2002, the Company's stockholders approved IEC's 2001 Stock Option
      and
      Incentive Plan (the "2001 Plan"), which superseded a similar plan that was
      adopted in 1993 (the “1993 SOP”).  As amended from time to time, the number
      of shares of common stock authorized for issuance under the 2001 Plan is
      3,100,000 shares.  Pursuant to the 2001 Plan, officers, key employees,
      directors and other key individuals may be granted various types of equity
      awards, including stock options, restricted stock and other stock awards. The
      option price for incentive options must be at least 100 percent of the fair
      market value at date of grant, or if the holder owns more than 10 percent of
      total common stock outstanding at the date of grant, then not less than 110
      percent of the fair market value at the date of grant. In conjunction with
      the
      approval of the 2001 Plan, no further grants will be made under the 1993 SOP
      and
      the 1993 SOP was terminated. Stock options issued under the 2001 Plan generally
      terminate seven years from date of grant. As of September 30, 2008, there
      were 582,918 shares remaining available for issuance under the 2001
      Plan.





Generally,
      incentive stock options granted during the period between July 1995 through
      September 2007 vest in annual increments of 25 percent. Starting with fiscal
      2007, some incentive stock options were granted that vest 50% after three years
      from the date of grant, and 50% after four years from the date of grant. In
      fiscal 2005, the Board of Directors granted certain incentive stock options
      that
      vest on the attainment of certain performance goals rather than on the basis
      of
      time. Nonqualified stock options granted to directors during fiscal years 1999
      to 2007 vest in increments of 33 1/3 percent six months, one year, and two
      years
      from the date of grant.


35





During
      2008, 2007, and 2006 the Company issued 201,500, 141,250, and 27,500 options,
      respectively. The fair value of each option issued during these periods was
      estimated on the date of grant using the Black-Scholes option pricing model
      with
      the following weighted average assumptions:





2008
            
            2007
            
            2006Risk
                free interest rate
            
            
            2.7
            %
            
            4.8
            %
            
            4.4
            %Expected
                term
            
            
            4.7
                years
            
            
            5
                years
            
            
            4
                yearsVolatility
            
            
            50
            %
            
            52
            %
            
            72
            %Expected
                annual dividends
            
            
            none
            
            
            none
            
            
            none





The
      weighted average fair value of options granted during 2008 was $0.81 with an
      aggregate value of $163,410. The weighted average fair value of options granted
      during 2007 was $0.81 with an aggregate total value of $113,980. The weighted
      average fair value of options granted during 2006 was $0.27 with an aggregate
      total value of $7,000. There were no dividends.





The
      Company’s expensing of stock-based compensation decreased both our basic and
      diluted net income per share by less than $0.01 for the fiscal years ended
      September 30, 2007 and September 30, 2008.





Changes
      in the status of options under the Stock Option Plan at September 30, are
      summarized as follows:





WeightedShares
            
            AverageUnder
            
            Exercise
            
            AvailableSeptember
                30,
            
            Option
            
            Price
            
            for
                Grant
            
            Exercisable**2005
                (fiscal year end)**
            
            
            1,626,129
            
            
            
            
            
            464,497
            
            
            789,159Options
                granted
            
            
            27,500
            
            
            0.63Options
                exercised
            
            
            (77,280
            )
            
            0.23Options
                forfeited
            
            
            (116,890
            )
            
            2.06**2006
                (fiscal year end)**
            
            
            1,459,459
            
            
            
            
            
            363,440
            
            
            700,580Options
                granted
            
            
            141,250
            
            
            1.68Options
                exercised
            
            
            (239,007
            )
            
            0.32Options
                forfeited
            
            
            (13,625
            )
            
            1.79**2007
                (fiscal year end)**
            
            
            1,348,077
            
            
            
            
            
            203,930
            
            
            704,447Options
                granted
            
            
            201,500
            
            
            1.80Options
                exercised
            
            
            (111,720
            )
            
            0.80Options
                forfeited
            
            
            (25,320
            )
            
            0.732008
                (fiscal year end)
            
            
            1,412,537
            
            
            
            
            
            582,118
            
            
            587,549





The
      following table summarizes stock options outstanding as of September 30,
      2008:





Options
                Outstanding
            
            Options
                ExercisableNumber
            
            Weighted
            
            
            
            NumberOutstanding
            
            Average
            
            Weighted
            
            Exercisable
            
            WeightedRange
                of
            
            at
            
            Remaining
            
            Average
            
            at
            
            AverageExercise
            
            September
                30,
            
            Contractual
            
            Exercise
            
            September
                30,
            
            ExercisePrices
            
            2008
            
            Life
            
            Price
            
            2008
            
            Price$
                0.09 - $ 0.21
            
            
            10,000
            
            
            1.46
            
            $
            0.21
            
            
            10,000
            
            $
            0.21$
                0.40 - $ 0.73
            
            
            621,787
            
            
            2.67
            
            $
            0.54
            
            
            205,549
            
            $
            0.54$
                0.95 - $ 1.29
            
            
            434,000
            
            
            1.27
            
            $
            0.99
            
            
            319,000
            
            $
            1.00$
                1.43 - $ 2.19
            
            
            346,750
            
            
            5.46
            
            $
            1.76
            
            
            53,000
            
            $
            1.571,412,537
            
            
            
            
            
            
            
            
            587,549





b.)
      Restricted Stock Awards - The Company granted 27,000 shares of restricted
      stock with an actual expense of $14,175 during fiscal 2008. The awards, which
      were made to Jeffrey Schlarbaum and Donald Doody, prohibit selling the shares
      for two years and are forfeited if the executives leave before the vesting
      date.


36





8.
      MAJOR
      CUSTOMERS AND CREDIT RISK CONCENTRATIONS:





Financial
      instruments, which potentially subject the Company to concentrations of a
      significant credit risk, consist primarily of cash, cash equivalents, and trade
      accounts receivable. The Company has concentrations of credit risk due to sales
      to its major customers. Five customers accounted for 62%, 61% and 66% of our
      revenue during fiscal 2008, 2007 and 2006 respectively. For fiscal 2008 and
      2007, no single customer exceeded 25% of total Company sales revenue. For fiscal
      2006, one customer exceeded 25% of total Company sales revenue.





At
      September 30, 2008, amounts due from two customers represented 24 and 14 percent
      of trade accounts receivable. At September 30, 2007, amounts due from two
      customers represented 28 and 19 percent of trade accounts receivable. The
      Company performs ongoing credit evaluations of its customers' financial
      positions and generally does not require collateral.





9.
      LITIGATION:





There
      are
      no material legal proceedings pending to which IEC property is subject. To
      our
      knowledge, there are no material legal proceedings to which any director,
      officer or affiliate of IEC, or any beneficiary owner of more than five percent
      (5%) of Common Stock, or any associate of any of the foregoing, is a party
      adverse to IEC.





Without
      the admission by any party of any acts of wrongdoing of any kind, all the
      parties entered into a Release and Settlement Agreement, dated June 25, 2008,
      (the "Agreement"), which settled all the issues and disputes raised in the
      action commenced on August 13, 2003 by General Electric Company ("GE") in the
      State of Connecticut against IEC, Vishay Intertechnology, Inc., and Vishay
      Dale
      Electronics, Inc. (collectively "Vishay"). Pursuant to the terms of the
      Agreement, Vishay has paid GE the sum of $350,000 and IEC has paid GE the sum
      of
      $100,000 and has agreed to pay GE an additional sum of $100,000 on or before
      June 25, 2009, free of interest. The entire $200,000 was expensed in fiscal
      2008
      during the quarter ended 6/27/08.





10.
      COMMITMENTS AND CONTINGENCIES:





a.)Equipment
      leases - As of September 30, 2008, the Company was obligated under
      non-cancelable operating leases, primarily for manufacturing and office
      equipment. These leases generally contain renewal options and provisions for
      payment of the lease for executory costs (taxes, maintenance and insurance).
      Rental expenses on equipment were $166,000, $5,000, $8,000 for fiscal 2008,
      2007
      and 2006, respectively. The increase in 2008 is mainly attributable to the
      equipment sale and lease-back transaction with M&T. Annual minimum lease
      obligations for manufacturing and office equipment are approximated as
      follows:





Year
            
            Amount2009
            
            $
            451,6642010
            
            
            451,6642011
            
            
            451,6642012
            
            
            451,6642013
            
            
            451,664Total
                minimum lease payments
            
            $
            2,258,320





b.)Val-U-Tech
      lease - The Company leases the buildings occupied by Val-U-Tech. The building
      is
      leased under a non-cancelable operating lease which expires in December 2012.
      Annual minimum lease obligations on the building are approximated as follows:





Year
            
            Amount2009
            
            $
            176,8572010
            
            
            176,8572011
            
            
            187,1502012
            
            
            187,150Total
                minimum lease payments
            
            $
            728,014




11.
      RETIREMENT PLAN:





The
      Company has a retirement savings plan, established pursuant to Sections 401(a)
      and 401(k) of the Internal Revenue Code. This plan is for the exclusive benefit
      of its eligible employees and beneficiaries. Eligible employees may elect to
      contribute a portion of their compensation each year to the plan. The plan
      allows the Company to make discretionary contributions as determined by the
      Board of Directors. There were no discretionary contributions for fiscal 2008,
      2007, or 2006.





12.
      SUBSEQUENT EVENTS:


There
      have been no material subsequent events.


37





SELECTED
      QUARTERLY FINANCIAL DATA (UNAUDITED)





First
            
            Second
            
            Third
            
            FourthQuarter
            
            Quarter
            
            Quarter
            
            Quarter(in
                thousands, except per share data)YEAR
                ENDED SEPTEMBER 30,2008:Net
                sales
            
            $
            11,160
            
            $
            11,940
            
            $
            11,888
            
            $
            16,104Gross
                profit (loss)
            
            
            1,147
            
            
            1,383
            
            
            1,413
            
            
            2,274Net
                (loss) income
            
            
            420
            
            
            673
            
            
            868
            
            
            8,516Basic
                earnings(loss) per share
            
            $
            0.05
            
            $
            0.08
            
            $
            0.10
            
            $
            0.99Diluted
                earnings(loss) per share
            
            $
            0.05
            
            $
            0.07
            
            $
            0.09
            
            $
            0.91YEAR
                ENDED SEPTEMBER 30,2007:Net
                sales
            
            $
            9,246
            
            $
            10,899
            
            $
            11,165
            
            $
            9,604Gross
                profit (loss)
            
            
            208
            
            
            1,529
            
            
            1,315
            
            
            825Net
                (loss) income
            
            
            (576
            )
            
            603
            
            
            553
            
            
            295Basic
                earnings(loss) per share
            
            $
            (
                0.07
            )
            $
            0.08
            
            $
            0.07
            
            $
            0.03Diluted
                earnings(loss) per share
            
            $
            (
                0.07
            )
            $
            0.07
            
            $
            0.07
            
            $
            0.03YEAR
                ENDED SEPTEMBER 30,2006:Net
                sales
            
            $
            3,607
            
            $
            5,580
            
            $
            5,379
            
            $
            8,054Gross
                profit
            
            
            519
            
            
            431
            
            
            755
            
            
            1,048Net
                income
            
            
            (48
            )
            
            (168
            )
            
            79
            
            
            352Basic
                earnings(loss) per share
            
            $
            (0.01
            )
            $
            (0.02
            )
            $
            0.01
            
            $
            0.05Diluted
                earnings(loss) per share
            
            $
            (0.01
            )
            $
            (0.02
            )
            $
            0.01
            
            $
            0.05




VALUATION
      AND QUALIFYING ACCOUNTS





September
            
            Charged
                to
            
            
            
            September30,
                2007
            
            Expense
            
            Deductions
            
            30,
                2008Allowance
                for doubtful accounts
            
            
            100
            
            
            73
            
            
            (28
            )
            
            145Inventory
                reserves
            
            
            1,005
            
            
            128
            
            
            48
            **
            
            1,181Warranty
                reserves
            
            
            115
            
            
            (9
            )
            
            92
            *
            
            198Deferred
                tax valuation allowance
            
            
            19,406
            
            
            -
            
            
            (16,094
            )
            
            3,312





*
            accrued
                for GE settlement


**
            customer
                funded





September
            
            Charged
                to
            
            
            
            September30,
                2006
            
            Expense
            
            Deductions
            
            30,
                2007Allowance
                for doubtful accounts
            
            
            59
            
            
            46
            
            
            (5
            )
            
            100Inventory
                reserves
            
            
            516
            
            
            (58
            )
            
            547
            **
            
            1,005Warranty
                reserves
            
            
            140
            
            
            26
            
            
            (51
            )
            
            115Deferred
                tax valuation allowance
            
            
            19,946
            
            
            -
            
            
            (540
            )
            
            19,406





**
            customer
                funded





September
            
            Charged
                to
            
            
            
            September30,
                2005
            
            Expense
            
            Deductions
            
            30,
                2006Allowance
                for doubtful accounts
            
            
            35
            
            
            4
            
            
            20
            *
            
            59Inventory
                reserves
            
            
            343
            
            
            4
            
            
            169
            **
            
            516Warranty
                reserves
            
            
            190
            
            
            -
            
            
            (50
            )
            
            140Deferred
                tax valuation allowance
            
            
            
            
            
            19,729
            
            
            217
            
            
            19,946





*
            recoveries


**
            customer
                funded


38